Short definition

Short is a position that profits when the price of an instrument falls. Going short means selling first to take negative exposure, so the position rises in value as the market drops and loses value as the market climbs.

A short position is opened by selling and closed by buying back, the reverse order of a long trade. In CFD, forex, futures, and options trading you can usually go short without owning the underlying asset, because the product is built to track the price either way. The position gains the difference if you buy back lower than you sold, and loses the difference if you buy back higher.

Short is the opposite of long: a long position is bought first and profits when the price rises, a short position is sold first and profits when it falls. Short is also narrower than short selling, which is the specific practice of borrowing an asset to sell it; you can hold a short position through a derivative without ever borrowing the underlying. Short positions carry open-ended risk, because a price can keep rising with no ceiling, so traders cap them with stop-losses and position sizing.

Short Example

You expect EUR/USD to fall from 1.0850 to 1.0800, so you open a short position at 1.0850.

If EUR/USD falls to 1.0800, you buy back lower and close the short for a profit.

If EUR/USD rises to 1.0900 instead, the short loses value, because a short position gains only when the price falls.