Going long and short: how buy and sell trades work

Every trade takes a view on direction. A long position is a buy trade: you open it by buying and close it by selling. A short position is a sell trade: you open it by selling and close it by buying back.

Traders say they are "long" when they hold a buy position and "short" when they hold a sell position. Both directions carry risk. What matters is how far the price moves, in which direction, and how large the position is.

On a currency pair such as EUR/USD, going long means buying the base currency (the euro) against the quote currency (the US dollar). If the pair's price rises after you buy, you can close the position at a higher price than you paid and the difference is a gain. If the price falls, closing it locks in a loss.

The same logic applies to other CFDs, such as gold or a stock index: a long position follows the price up and down, one for one, for the size you trade.

Going short means selling first and buying back later. On EUR/USD, a short position sells euros against US dollars. If the price falls, you buy back lower than you sold and the difference is a gain. If the price rises, buying back costs more than you sold for, and the difference is a loss.

With a CFD you never take delivery of the asset, so you can open a short position without owning or borrowing it. You simply agree to exchange the difference between the opening and closing prices.

Every quote has two prices. You buy at the higher ask price and sell at the lower bid price. The gap between them is the spread.

Because you open at one price and close at the other, a new position, long or short, starts with a small loss equal to the spread. The price has to move in your favour by at least the spread before the trade breaks even.

The result of a trade is the price difference multiplied by the position size. For a long position it is the closing price minus the opening price; for a short position it is the opening price minus the closing price.

• Long result = (closing price − opening price) × position size
• Short result = (opening price − closing price) × position size

The two directions mirror each other: the move that produces a gain on one side produces the same loss on the other. While a position is open, the platform shows this result as unrealised P&L; it becomes final only when you close the position. The worked examples below show both outcomes step by step.

Trading costs do not depend on whether you buy or sell. The spread applies to every position, a commission applies on some account types, and a swap is charged or paid for each night a position stays open.

Swaps are the one cost that can differ by direction. They depend on the interest rates of the two currencies, so the long swap and the short swap on the same pair are usually different, and either can be a charge. Each instrument's swap rates are shown in the trading platform.

Some platforms let you hold a long and a short position on the same instrument at the same time, which is a form of hedging. Each of the two positions keeps its own spread, commission and swap.

A stop loss closes a position automatically at a price you choose. On a long position it sits below the opening price; on a short position it sits above it. A stop loss does not ensure an exit at that exact price: in a fast market or a price gap it can be filled at a worse price.

Leverage applies the same way to both directions. It lets a small deposit control a larger position, so a given price move produces a larger gain or loss on your balance. The leverage guide explains how margin and leverage work.