Every discipline has its own language or at least some expressions. Trading has them too. It is crucial for your trading performance that you understand their meaning. It will help you to learn the platform, make good decisions, and communicate with other traders. This article will explain the terms “bulls”, “bears”, “short” and “long”.
Opening short positions, or shorting, is selling the asset at a high price and buying it back later on at a much lower price. So you borrow the asset to sell it and to buy it after some time with a profit. Such transactions are also known as being short or short-selling.
Bear in mind, that on Olymp Trade you sell contracts for the price difference when it comes to trading CFDs. You do not have to own the underlying asset, the transaction is based on the contract. But when you trade Fixed Time Trades shorting simply means you open a transaction for the price decrease.
When a trader believes that price will decrease he is being bearish. So the bear in the market means a fall. This term originates in an animal, the real bear, who punches with his paws downward.
A bearish market is when the prices are pushed down.
Now, you can act on your beliefs about falling prices and go short. Remember though your trades should be always based on deep market analysis.
Opening a long position implies you are buying the asset (or a contract or open Fixed Time Trade for the price increase). You can go long when you believe that the price of the financial instrument will rise. After some time, you will sell at a higher price and profit from the transaction.
Being bullish means a trader is convinced the price will increase. He may take action and open a long position. Again, we have an analogy to a real animal as the bull hits with its horns upwards.
We call a market bullish when there is an uptrend in the prices.
When you hear someone says he is long on that stock or that he is bullish on it, you can be sure this trader believes the prices will rise.
Pros and Cons of Trading Positions 😊 😞
- Understanding trading terms allows better communication with traders
- Opens up opportunities for different trading strategies
- Enhances decision-making process in trading
- Misunderstanding terms may lead to poor trading decisions
- Taking positions based on trends rather than detailed analysis can increase risk
|Trading Position||What It Means|
|Short / Bearish||Traders expect the price to decrease. This position involves selling at a high price with the aim of buying back at a lower price.|
|Long / Bullish||Traders anticipate the price to increase. This position involves buying an asset with the intention of selling at a higher price in the future.|
Short, bear, long, and bull are very commonly used in the trading world. You should know their meaning to understand what is going on in the market and to use information from articles, financial news, or conversations.
These terms are universal for different types of trading and investing and for various assets. No matter what you wish to trade, you must be acquainted with them as you will hear them often.
Short and bear indicate a fall in the prices and a trader is ready to sell.
Long and bull mean a rise in the asset’s price and that a trader is prepared to purchase a stock.
A trader can take an action and sell or buy with the hope of buying at a lower price (when selling) or selling at a higher price (when buying). This allows him to profit from the transaction.
Any time you decide to open a trading position, you should precede with market analysis. There are plenty of indicators and other tools on the Olymp Trade platform that will assist you in this task. Moreover, there is a free demo account in the offer which allows you to practice the trading approach in a risk-free environment.
Wish you good trading decisions!
Common Questions About Trading Positions 🧐
- Q: What does it mean to be ‘bearish’ or ‘bullish’?
- A: Being ‘bearish’ means a trader believes the price of an asset will fall, while being ‘bullish’ means a trader believes the price will rise.
- Q: How does one decide between taking a short or long position?
- A: Deciding between a short or long position typically depends on your analysis of market conditions and trends. Remember, it’s always important to base trading decisions on thorough market analysis.
- Q: What does ‘shorting’ mean?
- A: ‘Shorting’ refers to selling an asset at a high price with the intention of buying it back at a lower price later, expecting to make a profit from the price difference.
- Q: Can I be both ‘bullish’ and ‘bearish’ at the same time?
- A: While it may seem contradictory, a trader can hold both views at different times or for different assets. For instance, a trader might be bullish on one asset but bearish on another based on their respective market analyses.
- Q: Should I always follow the trend when deciding to go short or long?
- A: While following the trend can be a good strategy, it’s also crucial to perform your own analysis. Sometimes, trends can reverse, and markets can be unpredictable. Therefore, basing your decisions solely on trends can be risky.
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