Going Long vs Going Short: How to Trade the Markets Up and DownBlogs
Traders have their own language to describe the financial markets. And one of the most common phrases you hear is ‘going long’ or ‘going short.’
It can be summed up in very simple terms:
- Going long: you think an asset (commodity, stocks, indices, currencies, etc.) will go up in value.
- Going short: you think an asset (commodity, stocks, indices, currencies, etc.) will go down in value.
Going long: what does it mean?
This is the easiest way to trade on the markets. Going long simply means you think a stock, index or currency will go up. You buy the asset at the current price and aim to sell it later for a higher price.
You can ‘go long’ for different time frames, whether it’s hours, days, weeks or even years.
Going short: what does it mean?
Going short is the opposite. You think the price of a stock, index or currency will go down.
Traders might use this strategy if they think a company’s stock is overvalued. Or if they think the market is due for a correction or a particular currency will get weaker compared to another.
This strategy was made famous by the movie, The Big Short where a few traders spotted the 2008 financial crisis coming. They made millions by ‘going short,’ and placing trades that would make a profit if the market crashed.
How does it work on Stryk?
On Stryk, we make this process very straightforward. When you’re ready to trade, you simply hit the ‘up’ arrow to go long, or tap the ‘down’ arrow to go short.
It’s our mission to make trading as simple as possible for you. However, if you’re curious, here’s what happens behind the scenes when you open a short position.
When you go short, you have a contract with a broker and immediately sell them at the current market price. If the share price falls as you predicted, you then buy them back at a lower price and return them to the broker. Because the price dropped, you now pocket the difference.
The ‘Bulls’ vs ‘Bears’
If the jargon wasn’t already confusing, there’s more!
In financial terms, you are known as a ‘bull’ when you’re going long. You might also say you’re ‘bullish’ on a stock if you think it’s going up. But you’re a ‘bear’ when you’re going short. Or you’re ‘bearish’ on a stock.
We hope that clears up some of the most common phrases in the financial markets!