Long Trading and Short Trading CFDs

By David Land

Part of CFDs For Dummies Cheat Sheet (Australian Edition)

One of the great features of CFDs is that you are able to trade on both the long and the short side of the market. Even if in the early stages of your CFD trading experience you aren’t sure whether you’ll wish to trade on the short side, you should still spend some time learning what it’s all about so your market knowledge is more rounded.

  • Trading the long side means that you have used a buy order as your opening trade or ‘gone long’. This means that you are anticipating a rise in price and will use a sell order to close your position.

  • Trading the short side means that you have opened your trade using a sell order or ‘gone short’. This means that you expect prices to fall and will use a buy order to close your position. (This may sound odd but it’s the way you close out your exposure to the market.) The benefit of short trading is that you can profit directly from falling prices, which is very difficult to do without the use of products such as CFDs.