Short, Long Or Flat In Day Trading

Short, Long Or Flat In DayTrading?

If you are familiar with daytrading, you will have heard or used the terms “bull and bear” market.  The image of the bear fighting the bull refers to the directional movement of stocks or commodity prices up or down. The bull lifts up the bear with it’s horns. The bear crashes it’s giant arms down upon the bull. The battle ensues and is non-stop. 

If a trader is in a trade on the basis that the market is going to force the price upward this is known as LONG position. SHORT position in daytrading is the other side of the coin. When the price moves down, it is possible to sell the base price. 

These two ways to make a profit and movements in the market are known as “longs” and “shorts”. The position you take will be long or short if you are entering a trade. Long position is “buy” position if you like and Short position is “sell” position. You can remember this because “S” is for SHORT and for SELL.

Later, when you “close your position” it is as though you have done the reverse. In fact that is exactly what you have done. The profit/loss you have made depends on the change in value, which takes place to the fraction of a second, 24 hours per day from the US to the UK (except weekends).

That leaves us with the question, what is a FLAT position in Daytrading?

Well, the answer is simple. What if you decided not to trade at all? This is known as a FLAT position. If you are FLAT it means you decided to stay out of the market, usually because you couldn’t see an opportunity to trade. If you are a gambler, you won’t care if there is an opportunity to trade or not, you will miss the value in being flat and you will lose your money.

Being flat is therefore a position. It’s a positive position to be in, because although you are not winning money, you are not losing it either. Any professional trader knows that capital preservation is!

Staying flat is the best thing to do when you’re just not sure or uncertain about trading. This is why it’s crucial to get a thorough understanding of a technical and fundamental strategy and learn it until you’re proficient enough and confident enough in your understanding the market and responding to it with your trading. If there is no price action and the market is not going anywhere, being flat is the best position in this kind of market situations.

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Hope this helps,

Alexander Soares

 

 


Also published on Medium.