Short Position
Account & Order Concepts
A short position is a trade that profits when the price falls, opened by selling an asset first with the aim of buying it back cheaper.
What is a short position?
Going short means selling an asset first, with the intention of buying it back later at a lower price. If the price falls as expected, the position profits from the difference; if the price rises instead, the position loses money. Shorting reverses the usual “buy low, sell high” order into “sell high, buy back low” — but the underlying goal, capturing a favorable price difference, is the same.
In forex, every trade already involves two currencies, so going short is straightforward: shorting EUR/USD simply means selling euros and buying US dollars, betting the euro weakens against the dollar. Unlike shorting individual stocks, which can require borrowing shares, shorting a currency pair or CFD generally requires no special borrowing step — the broker handles it as part of the trade.
A worked example
Say you open a short position on 1 mini lot of EUR/USD (10,000 units) at 1.0900, where each pip is worth about $1. If the price falls to 1.0850 — a 50-pip drop — your position gains roughly $50. If the price instead rises to 1.0950, you’d have a floating loss of about $50 until you close the trade.
Short vs. long position
A short position is the direct counterpart to a long position. Both are simply an open position held in one of two possible directions. Some traders use short positions to speculate on a decline, while others use them defensively — opening a short as a form of hedging to offset risk in an existing long holding elsewhere in their portfolio.
Why it matters
The ability to go short is one of the defining features of forex and CFD trading compared to traditional buy-only stock investing: traders can potentially profit in falling markets, not only rising ones. That flexibility also means risk works both ways — a short position on an instrument that keeps rising can produce losses just as real as a badly timed long, so the same risk management principles apply regardless of direction.
Trading involves risk, and losses can occur in either direction. This article is educational and not financial advice.