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Runner (level 1) · Lesson 11 of 13

Long and short

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Key questions

What does long mean?
You bought first, and you make money if the price goes up.
What does short mean?
You sold first, and you make money if the price goes down.
Do I need to own anything to go short?
No. In futures, selling short is as simple as clicking Sell.
How do I close a position?
Make the opposite trade in the same contract and quantity. Then you are flat.

The full lesson follows below.

Long and short

Most people only know one way to make money in markets: buy something, hope it goes up, sell it later. In futures, there is a second way that is just as easy. You can sell first and buy back later. This lesson explains both directions.

Going long

Long means you bought. You make money if the price goes up.

  • You buy 1 MNQ at an example price of 20,000.00.
  • The price rises to 20,010.00, and you sell.
  • That is 10 points times $2 = $20 profit.

If the price had fallen 10 points instead, you would have lost $20. Long means you want the price to rise.

Going short

Short means you sold first. You make money if the price goes down.

  • You sell 1 MNQ at an example price of 20,000.00.
  • The price falls to 19,990.00, and you buy it back.
  • That is 10 points times $2 = $20 profit.

If the price had risen 10 points instead, you would have lost $20. Short means you want the price to fall.

(Prices in these examples are made-up round numbers, not real quotes.)

Wait, how can you sell something you do not have?

Remember Lesson 1: a futures contract is an agreement about a future trade, not a thing you own. Selling a contract just means you have taken the seller’s side of that agreement. You do not need to own anything first.

That is very different from the stock market, where shorting a stock depends on shares being available, and where there can be extra rules about when you are allowed to short. CME points out that futures do not have those same restrictions: you can take a short position as easily as a long one. On your trading platform, it is literally a different button: Sell instead of Buy.

Two panels. Long, buy first and sell later: a line rises from buy at 20,000 to sell at 20,010, with an up arrow labeled price up = profit and a note that price down = loss. Short, sell first and buy back later: a line falls from sell at 20,000 to buy back at 19,990, with a down arrow labeled price down = profit and a note that price up = loss. Example prices, not real quotes.
Example prices only. 1 MNQ, 10 points = $20 either way.

Opening and closing

Every trade has two halves:

To open To close
Long Buy Sell
Short Sell Buy

Closing a position means making the opposite trade in the same contract and the same quantity. If you are long 2 MNQ, you sell 2 MNQ of that same contract month to get out. If you are short 1 MES, you buy 1 MES to get out. Once your opposite trade is done, you are flat, which means you have no position.

The math is the same in both directions

Profit and loss work exactly the same way for longs and shorts: ticks moved, times dollars per tick, times contracts. The only difference is which direction counts as a win.

That symmetry includes the risk. A long position loses money when the price falls, and a short position loses money when the price rises. Neither direction is safer. A price can keep rising for a long way, so a short trade that goes wrong can lose just as fast as a long trade that goes wrong.

Key ideas

  • Long = you bought first. You profit if the price goes up.
  • Short = you sold first. You profit if the price goes down.
  • In futures, selling short is as simple as clicking Sell. No borrowing needed.
  • To close, make the opposite trade in the same contract and quantity. Then you are flat.
  • Gains and losses are calculated the same way in both directions.

Sources

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