Short Position
A short position is a trading strategy that involves selling a security, such as a stock, currency, or commodity, that the trader does not own. The trader borrows the security from a broker and sells it, hoping to buy it back later at a lower price. If the price of the security falls, the trader profits from the difference between the sale price and the lower purchase price. If the price of the security rises, the trader incurs a loss.
History of Short Position
Short selling has been around since the early days of trading. It was first used by traders in the Netherlands in the 17th century. The practice was later adopted by traders in the United States in the 19th century. Short selling has become increasingly popular in recent years, as traders have become more sophisticated and have access to more sophisticated trading tools.
Comparison Table
| Strategy | Risk | Reward |
|---|---|---|
| Long Position | Low | Low |
| Short Position | High | High |
Summary
Short positions are a high-risk, high-reward trading strategy. They can be used to capitalize on falling markets, but they can also lead to significant losses if the market moves against the trader. For more information about short positions, traders can consult financial websites such as Investopedia and The Balance.
See Also
- Long Position
- Margin Trading
- Options Trading
- Futures Trading
- Day Trading
- Swing Trading
- Scalping
- Arbitrage
- Hedging
- Market Making
