Short Position
Selling an asset with the expectation that its price will fall, allowing you to buy it back cheaper.
Going short means selling an asset you do not own, expecting its price to fall. In forex, going short EUR/USD means selling euros and buying dollars.
Going short means selling an asset you don't own, expecting its price to decrease. You profit when price falls and lose when it rises. In forex, going short EUR/USD means selling euros and buying dollars.
How It Works
- Borrow and sell at current price
- Wait for price to fall
- Buy back at lower price
- Return borrowed asset, keep the difference
Trading Tips
Potential loss is unlimited (price can rise indefinitely)
Used to profit from declining markets
Stop loss above entry to limit upside risk
Short Position Example
Say you short 0.5 lots of GBP/USD at 1.2700 and it drops to 1.2600. That 100-pip fall at $5 per pip banks about $500 before costs. Every pip down pays you. Every pip up bills you, with no ceiling on the bill.
How Traders Use Short Position
Short with the trend or into clear resistance, never because price feels high. Losses on shorts can sprint, so the stop matters more than on longs, and overnight shorts on high-yield currencies can even earn carry.
Related Terms
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