Just like in the stock market, people buy shares at a cheap price and sell them at an expensive price and earn profits, in the same way, profit can also be made by selling shares at an expensive price in the stock market and later buying it at a cheap price. There are two types of sentiments working in the market. First, Bullish and second Bearish. If you buy shares of a company and expect the price to rise, then it is called going long or long position. On the other hand, if you think that the stock price is going to fall and you sell it before it is transfered in your name, then it is called a short position. You can expand your knowledge about short and long positions on 5paisa. Click on the link 5Paisa to know more.
Meaning of long position
If there is a bullish trend in the market and the trader feels that the share price will go up, then he can hold it for a long time. Later, when the price rises, he can earn profit by selling the shares. For example, a share of ABC company is worth Rs 100. If the trader feels that in time it will go up to Rs 120, then he will buy this stock for Rs 100 and will earn profit by selling it after the price reaches Rs 120. This means that the stock was held for the long term in anticipation of a price increase in the future.
Meaning of short position
Going short or shorting may sound a bit strange. Usually, in trading, any goods have to be bought before they can be sold, but this is not the case in the stock market… Actually, when an investor goes short, he borrows the shares from the broker at the market price and sells them. Later, he buys the same share at a cheaper price and returns it to the broker. This is done because the trader feels that when the stock falls, he can make a profit by buying it at a cheaper price.
Long and short position trading mostly takes place in the derivatives or futures and options segment, where the trading takes place at the present time for future delivery of shares.
For more details, on long and short position visit 5paisa (https://bit.ly/3RreGqO)
Download Money9 App for the latest updates on Personal Finance.