What is Long and Short Position in the Stock Market?

A long position simply means buying and owning shares of a stock to make a profit when the price of the stock goes higher. And short position simply means selling the stocks when the stock price goes down. In a short position, the stocks which are for selling are not owned by the investor. Now let's understand What is Long and Short Positions in the Stock Market in an easy way.

The stakeholders and investors use the terms long and short position about buying or selling of stock. In this way, the discussions take place between the investor and stakeholders by referring to the shares as long and short.

Position Overview

The position is the amount that an investor pays to own an asset, stock or property. When an investor buys a stock then it is bullish intent. If the investor sells a stock then it is a bearish intent.

Position Types

1. Open Position
2. Closed Position

For every trade either the position opens or it closes. An open position refers to the purchase of a stock that needs to be closed. Let's say an investor buys 100 shares of a company then now it's an open position until the shares are sold.

On the other hand, a closed position means the trade is closed. If an investor sells the stock at the same price when it was purchased then it is said to be closed.

Note: It hardly matters if an investor is in a long or short position, what matters is the expectations. The expectations are about the share price and whether it will go higher or not. And the decision has to be made by the investor by considering the scenario of the share market.

Long Position

Long Position means buying a stock and then hoping for the price to increase to have profit. In a long position, the investors usually wait for the stocks to go up. It allows the investors to sell the stocks at a higher price and make money out of it.

For example: If an investor has 100 shares of Reliance Industries Ltd then it is known as 100 long shares. It simply shows that the investor has purchased the shares completely.

Short Position

The short position is completely different from the long position. Here the investors eagerly wait for the price to drop.

A short position means selling stocks. Here it becomes necessary for the investor to sell the stocks. The thing is that the investor doesn’t own the stocks that need to be sold. Instead after selling the stock the other investor owns it.

For example: Let's say an investor sells the 100 shares of Reliance Industries Ltd without owning them then it can be said as short 100 shares.

After the trade happens the investor with a short position has to buy shares so that they can deliver in future. Here the investor needs a margin account. The margin account helps the investor in getting cash from the broker for the purchase of equity, stocks or an asset. In this way, it is always said for the investor that the investor can only sell stocks not own them. Because of the margin account.

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Long Position vs. Short Position

SNo.	Long Position	Short Position
1	The investor buys and owns the stock.	The investor sells the stock which he doesn’t own.
2	When the stock price increases the investor makes a profit.	Here when the stock price decreases then the investor makes a profit.
3	No need for a margin account in case of a long position.	Here margin account is necessary for the investor.
4	e.g. When an investor buys 100 shares of a company then the investors or the public calls it 100 long shares.	e.g. When an investor sells 100 shares of a company then the investors or the people call it 100 short shares.
5	In another way long position is Buy Low Sell High	In case of short it is Sell High Buy Low

Conclusion

In the end, it all depends on the market scenario. To make a profit from the long position market should go up. Profit can be made from short positions when the market goes down. So before going for the long or short position in the market investors have to be sure about the investment. So this is all about the Long and Short positions in the Stock Market.