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Risk and performance

Long and short:the two directions of a trade.

Going long means buying an instrument to profit if its price rises; a long position gains when price goes up and loses when it falls. Going short is the reverse: selling first to profit if the price falls. On currency pairs every trade is both at once - buying EUR/USD is long the euro and short the dollar.

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What a long position is

A long position is bought first and sold later. Its profit is the rise in price multiplied by the position size; its loss is the fall. On a share, the most a long position can lose without leverage is what was paid for it.

What going short means

A short position is sold first and bought back later. In the stock market, short selling usually means borrowing shares to sell. On CFDs and currency pairs no borrowing is visible to the trader: the contract simply pays or charges the price change in the opposite direction.

Because a price can rise without a fixed limit, a short position's potential loss is not capped by the price falling to zero, as a long position's is. Stops matter at least as much on shorts as on longs.

Long and short on currency pairs

A currency pair is always quoted as one currency against another: the first is the base currency and the second the quote currency, and the price is how many units of the quote currency one unit of the base buys. Buying EUR/USD is long the euro and short the dollar; selling it is the reverse. That is why a trade on EUR/USD and one on GBP/USD can both be, in effect, a bet against the dollar - and why they can lose together. See risk on, risk off on correlated positions.

Step by step

How to identify it

Before entering, state the trade in both directions.

  1. Name the instrument and whether you are buying (long) or selling (short).
  2. For a currency pair, name which currency you are long and which short.
  3. Set the stop on the side where the idea is wrong - below for a long, above for a short.
  4. Check what else you hold in the same currencies.

Worked example

The concept,walked through

A long and a short, described

An illustrative pair of trades in words, with round numbers standing in for price. It is not taken from any real instrument or date.

  1. 1. LongA trader buys at 100 with a stop at 98. If price rises to 104, the trade gains 4; if it falls to 98, it loses 2.
  2. 2. ShortAnother sells at 100 with a stop at 102. If price falls to 96, the trade gains 4; if it rises to 102, it loses 2.
  3. 3. PairOn EUR/USD, the long trade is long the euro and short the dollar; the short trade is the reverse.

The two trades are mirror images. Direction is the choice; the risk is set by the stop and the size, whichever way the trade faces.

Common mistakes

Where tradersgo wrong

Forgetting the second currency

Every pair trade is also a position in the quote currency.

Holding shorts without a stop

A rising price has no ceiling.

Stacking the same exposure

Several trades against the same currency are one larger bet.

Limitations

What it cannottell you

No chart concept predicts price. These are the limits worth keeping in view.

  • Direction is only half a trade; the size, the stop and the costs decide the risk.
  • Swap and financing costs differ between long and short positions held overnight.

In an evaluation

Using it on asimulated account

Both directions are available on simulated accounts, and the same limits apply to each. On a $100,000 account the daily loss limit is $3,000 on Instant or $5,000 on 1 Step and 2 Step, measured across every open position in either direction.

Trading rule

What is the daily loss limit?

One ceiling across long and short positions - 3% on Instant and 5% on 1 Step and 2 Step.

Trading rule

Can I hedge?

What applies when long and short positions offset each other.

Trading rule

Can I hold trades overnight and over the weekend?

Holding either direction overnight or over a weekend.

Questions

Asked aboutthis concept

Buying an instrument so the position gains if its price rises and loses if it falls.

A long position profits from a rise in price; a short position profits from a fall. On a currency pair, every trade is long one currency and short the other.

Keep learning

Relatedlessons

Risk and performance

Notional Value in Trading, Explained

The full market value behind a leveraged position - how it is calculated, how it differs from margin, and what notional volume and notional limits measure.

Risk and performance

Risk On, Risk Off: Meaning in Markets

The shorthand for markets moving together as investors seek or shed risk - which assets usually go which way, and why the pattern breaks.

Risk and performance

Balance vs Equity in Trading

Why an account shows two numbers - balance and equity - what separates them, and why risk limits usually watch equity.

Sources

What this pagerelied on

  1. Long (finance) - Wikipedia. Retrieved 23 September 2026. The definition of a long position.
  2. Short sale - US Securities and Exchange Commission, Investor.gov. Retrieved 23 September 2026. Short selling as selling borrowed securities, and why losses on a short are not capped.

Educational content only, not investment advice or a recommendation to trade. Chart concepts describe what price has done; none of them predicts what it will do, and trading any strategy can lose money. Get Funded Now accounts are simulated and trade virtual funds. Last reviewed 22 September 2026.

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