Long and Short in the speculative action

Assuming a position long or short? Forex traders use daily these terms – an explanation.

Long and Short are the two names for rising (long) and falling (short) courses, they come from the warrant labeling. Long or wide buyers keep their options on rising prices at the short end sit the seller or writer.

The modern take Trader as history lessons note, it does not matter for the current stock market. Today if you are taking a long position, so bet on rising prices, sits against you no sellers, but the issuer You can find their review on this page or the broker as a market maker, the obligation is, no matter at what price in a split second relieve you of the paper again.

Therefore, long and short, only two other marks for the taking of positions, just as with „Bull“ and „Call“ the derivatives on rising, with „Bear“ and „put“ the derivatives are designated on falling prices.

Long and Short as location identification

Bulle_Baer_bronzeWhile a dealer group is identified with the bulls and bears (not for nothing were before the Frankfurt Stock Exchange placed the two nice animals as sculptures), the traders speak with call and put is always only on the securities themselves, for long and short, the fundamental meant taking a position (as the bull or bear). Who speculated long, believes in rising prices, the short-buyer thinks the opposite.

In the stock market it’s all very easy to understand, the terms lose in the forex market their clear statement, because Read our review before investing who goes with EUR / USD long, though believes in against the dollar rising euro, which has not necessarily have anything to do with appreciation. The value of the total currency finally remains constant (unless someone changes the money supply), it just shifts the relationship.

Therefore, long and short are relative terms today, much more they will do so if we look at the real trading action in which two-way money is made.

Long and Short in the speculative action

Not only for hedging, even for ordinary, profit speculation Short positions are taken, because the corresponding Bear Certificates on falling prices gain as well in value as their counterparts Bull to rising prices. Let us therefore ponder something philosophical about amateur politicians who want to ban short selling of shares over again, to stabilize the financial markets.

The idea comes from many American politicians, from our Physics doctor Chancellor Merkel, we have not heard such nonsense. Those politicians whose training is unknown (it is somewhat reminiscent of communist dictators who by the roofer ascended to head of state) have understood by the financial markets so little that the poor, knowing, but powerless trader begins to fear. So: The days when long positions synonymous with rising share prices and thus automatically were for prosperity are long gone, and indeed about for almost one hundred years.

Trader legend Jesse Livermore, who shot himself, unfortunately, in 1940, because he probably did not understand the markets (he shot himself three million dollars on the account), made the most money in the Great Depression in the early 1930s – he had time to “ set „Short and shares sold short. So what? Short is so angry? It has made money, earned just as the German bank currently with trading the most money after the investment banking no longer functioning properly. And in this trading is simultaneously set to Long and Short.

The money bringer in the financial industry are derivatives in any direction, short positions earn in the ups and downs of the market as much money as long positions – or lose it. When that happens, is beaten into the banks and their traders because the latter not have the courage to shoot himself as once Jesse Livermore. They must not. A hefty defeat would be enough, but not saving the losers with your and my tax money, ladies and gentlemen.