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In trading, short describes a trade that will incur a profit if the asset being traded falls in price. It is also often referred to as going short, shorting or sometimes selling.
Short definition
In trading, short describes a trade that will incur a profit if the asset being traded falls in price. It is also often referred to as going short, shorting or sometimes selling.
Shorting is the opposite of going long, or trading to incur a profit if your market increases in price.
The most well-known method of shorting is short selling. There are two main methods of short selling:
- When a trader borrows an asset they do not own from a broker and sells it on the market. Usually the borrowing and selling of the asset is taken care of by the broker.
- Derivatives such as CFDs or spread bets enable traders to open short positions that do not require borrowing the underlying asset.
There are other ways of opening short positions. Digital 100s – which can only be traded by professional clients – offer a simplified form of option that do not require the trader to own the underlying asset, for instance.
As an asset could theoretically increase in price indefinitely, short selling requires careful risk management to prevent losses from overrunning. Find out more about managing risk.
Read more about share dealing
The value of shares, ETFs and ETCs bought through a share dealing account, a stocks and shares ISA, a SIPP or an IG Smart Portfolio can fall as well as rise, which could mean getting back less than you originally put in. Spread bets and CFDs are leveraged products and can result in losses that exceed deposits. Spread betting and CFD trading are not permitted within the IG SIPP. Please ensure you fully understand the risks and take care to manage your exposure.
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