What is a Short Position?

Opening a short position, also called selling short, involves borrowing an asset, selling it, and then buying it back later at a lower price. This strategy aims to profit from a decline in the asset's value.
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Understanding short positions is key to effective trading. Traders open a short position when they expect an asset’s price to fall, while a buy position is opened when they anticipate a price increase. Both strategies require careful consideration of the risks and potential rewards involved.
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On FNmarkets, short selling is facilitated through Contracts for Difference (CFDs). Like most platforms, FNmarkets operates with a spread, where the ask (buy) price is higher than the bid (sell) price. This means the price at which you open a position differs from the price at which you close it.
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When you sell short, your position starts at the bid (sell) price. It gains value as the asset’s price decreases and loses value if the price rises. To close a short trade, the position is settled at the ask (buy) price.