Every trade begins with a view about price. You may expect a market to rise, expect it to fall, or decide that the conditions are too uncertain to trade. But choosing a direction is only the beginning. You also need to understand what you are trading, how the position opens and closes, and how price movements affect your result. In this lesson, you’ll learn the difference between buying and selling, how long and short positions work, and why being right about direction does not always mean making a net profit.
The idea
Buying: when you expect the price to rise Opening a buy position is often called going long. You benefit if the price rises after your entry and lose if it falls. Imagine buying 10 shares at $100 each. Your total purchase value is $1,000. If you later sell all 10 shares at $105, the price difference produces a $50 gain before costs. If you sell at $95 instead, the price difference produces a $50 loss. The direction is straightforward: you bought first, so a higher selling price helps you. A lower selling price hurts you. However, buying shares and opening a long CFD are different transactions. Buying shares normally gives you ownership in a company. A CFD gives you exposure to price changes through a contract, without ownership of the underlying asset. The contract’s specifications determine how each price movement affects your account. Selling: closing an investment or opening a short “Sell” can mean two different things. If you already own an asset, selling it usually reduces or closes that investment. You are exchanging something you own for its current selling price. Going short means opening a position that benefits from a fall in price. With a CFD, you sell to open the position and buy to close it. Suppose you open a short CFD position at $100 and close it at $95. You sold at the higher price and bought back at the lower price, producing a gain before costs. If the price rises to $105 instead, buying back costs more than your opening selling price. The position produces a loss. Short selling physical shares involves different mechanics, including borrowing shares. Do not assume it works exactly like opening a short CFD. How positions open and close • Long: Buy to open → Sell to close → Benefits when price rises. • Short: Sell to open → Buy to close → Benefits when price falls. Check how your platform handles closing trades. Depending on the account setup, an opposite order may reduce your existing position or open a separate position. Use the documented close-position control and verify the remaining quantity. Why there are two prices A trading ticket normally shows a bid and an ask. • Bid: the quoted price at which you can sell. • Ask: the quoted price at which you can buy. The difference is the spread. Imagine a quote of $100.00 bid and $100.10 ask. If you buy at $100.10 and immediately close at the unchanged bid of $100.00, the position loses $0.10 per unit before other charges. This explains why a new position can show a small loss immediately. The market does not necessarily need to have moved against you: you entered on one side of the quote and would exit on the other.
Apply the idea
Compare a long and a short For these examples, assume a simplified CFD where each unit gains or loses $1 for every $1 price movement. Use actual entry and exit fills. Commission, financing, and conversion are excluded. Example 1: You expect a rise You buy 10 units at $100. If you close at $104: ($104 − $100) × 10 = $40 gross profit If you close at $97: ($97 − $100) × 10 = −$30 gross loss Example 2: You expect a fall In a separate trade, you sell 10 units at $100. If you close at $96: ($100 − $96) × 10 = $40 gross profit If you close at $103: ($100 − $103) × 10 = −$30 gross loss The same market movement can help one direction and hurt the other. Neither direction is inherently safer simply because it feels more familiar. Now change the size Repeat the first example with 20 units instead of 10. A rise from $100 to $104 produces an $80 gross gain. A fall from $100 to $97 produces a $60 gross loss. Your market view has not changed. Your exposure has doubled. This is why direction and position size must be considered together. Confidence does not reduce the money lost per price movement. Check the result after costs Suppose your actual fills produce a $40 gross gain, but separately charged commission and financing total $5. Your net result is $35. If those fills produce a $30 gross loss, the same charges increase the net loss to $35. Actual fills already reflect the prices at which you bought and sold. Avoid subtracting the spread again when it is already included in those prices. Practise before moving on In a demo account: 1. Identify the instrument, bid, ask, and quantity units. 2. Open a small long position and locate its closing control. 3. Observe how its unrealised result changes as the available closing price moves. 4. Close it and check the actual fills and costs in the history. 5. Repeat with a separate short position. 6. Explain why each position gained or lost, using direction, price difference, and size. Before each practice trade, write what you expect and what would show that your idea is wrong. Afterwards, compare your explanation with the recorded result.
Key takeaway
Going long means buying to benefit from a rise. Going short means selling to benefit from a fall. Both can lose money. Your final result depends on more than direction: position size, contract specifications, execution prices, and costs all matter. Before opening a position, you should be able to explain what you are trading, how to close it, and what an adverse price movement would do to your account.
