Trading: the long and the short of it

With the right tools, traders can reap rewards from falling markets

For many traders, the markets are a one-way street – and that way is up. Going long when stocks go up is a time-tested strategy, but what about those times when stocks are down? If your only plan is to buy the uptrend, you could be missing out on half of the markets’ opportunities.

You can profit from falling markets – and learning to go short could be a real game-changer for your trading.

What is shorting?
Take a look at any stock or index chart and you’ll see that prices rise and fall, weakening and strengthening throughout the day. So, if there are two types of market moves – up and down – you need two types of trades – long and short – to take advantage of those moves. 

Think of shorting as the mirror image of going long, giving you the power to trade any market movement and take advantage of both rising and falling prices. That means more opportunities in all market conditions.

Trading short
Just how do you short-sell? Instead of buying a stock to profit when its price goes up, you sell a position on a stock to profit when its price falls. When you’re ready to close your short position, you simply buy the position back, closing the position and realising the price difference. 

Let’s say you spot a stock you think is going to decline due to negative company news. You open a short position at 15.75 and later, the stock falls just as you anticipated – all the way down to 15.25. There, you buy the stock to close your position, for +0.50 in your P&L. 

Of course, stocks don’t always do what we expect – and in this case, if the stock rose instead and you closed the position at 16, you’d have a -0.25 loss. And in the interest of transparency, we’ll note here that the losses on a short position are, in theory, potentially high, as a long position can only go to zero, but a stock’s price could in theory keep rising. So using stop-loss orders to limit losses is often a good idea.

The tools of the short trade 
Once you’ve mastered the basics of shorting, you’ll need the right tools. Stock options and futures can both be used to profit from declining prices but they do require a solid understanding of the options and futures markets. 

CFDs (Contracts for Difference) are relatively straightforward. They’re traded on margin, so you can easily short a wide range of products, from stocks and indices to forex pairs and commodities like gold and oil – and you won’t have to deal with more complex concepts such as Greeks, strike prices or expiry dates. 

Whichever tools you choose, with shorting in your toolbox you’ll be ready to make your move whichever way the market moves.

Trading CFDs: The short version

Don’t stop short of expanding your trader toolbox. 
Read more about how CFDs can make sure you capture the returns of the
market ups and downs.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.