DEFINITION of position
A position is a financial term for a trade that is either currently able to make a profit or a loss (an open position) or has recently been canceled. This is a closed position.
WHAT IT IS IN ESSENCE
Positions are the way in which a trader will hope to make a profit.
Position trading follows intermediate trends. Position traders use fundamental analysis to select buy candidates and technical analysis to pinpoint the correct buy points – breakouts. They buy a stock and hold it for the duration of the trend, typically several months, and ignore short-term fluctuations.
Trader’s open positions are the trades made and that are still able to incur a profit or a loss. When is closed, all profits and losses are realized and the trade is no longer active.
To close an open, a trader usually needs to reverse the trade made to open it. Meaning, selling any assets that have been bought, or vice versa. Alternatively, this can happen automatically if a position reaches its expiry date or has a stop or a limit in place which is subsequently filled.
There are some exceptions to this, as some trades will always run until their expiry and cannot be closed by the trader, and some trades have no expiry.
HOW TO USE
Positions come in two main varieties:
Long, that aim to make a profit when an asset’s price increases
Short, that aim to make a profit when an asset’s price decreases
Profit or loss is only realized when the position is closed.
Let’s explain each of them.
If the trader feels that the share price of the company XYZ will rise, the trader will buy it. So he holds a few shares of that company. That conveys, a trader is holding a long in XYZ company.
If the trader feels that share price of XYZ company will go down, then you can short sell the shares of XYZ company. That conveys the trader is holding a short in XYZ company.