Open Positions Definition

What Is an Open Position?

An open position is a trade that is still able to generate a profit or incur a loss. When a position is closed, all profits and losses are realized, and the trade is no longer active. Open positions can be either long or short – enabling you to profit from markets rising as well as falling.

Example of An Open Position

Let’s suppose that you want to go long on shares in EUR/USD and place a trade. Once you have decided the parameters of your trade – and done the necessary technical analysis and fundamental analysis – you would enter the market. At this point, your position would be considered ‘open.'

To close an open position, you would usually need to reverse the trade that you placed to open it (selling any assets that you have bought, or vice versa).

An open position would get closed automatically if it had a stop or a limit attached, which was subsequently filled.

Pros and Cons Of an Open Position

Pros Of an Open Position

An open position offers the opportunity for a trader to realize a profit. Without having an open position in a market, a trader would have no exposure and so couldn’t expect to receive any returns.

Leverage can be an excellent way for a trader to maximize profit on their open positions by gaining full market exposure for a small initial deposit. However, while trading on leverage can increase profits, it can also amplify losses.

Cons Of an Open Position

With financial exposure, comes the risk of losing money. As a result, a trader to needs create a risk management strategy. This could include learning about the risks of leveraged trading or how to hedge an open position.