Course: Foundations·Lesson 3 of 3·8 min read·Last reviewed 12 May 2026
Understanding positions
Long and short are directions, not moods. Here is how exposure actually works.
Dr. Maya Halloran
CFA · 14 yrs on a commodities prop desk · ex-lecturer, NYU Stern
By the end of this lesson you'll be able to:
- Define long and short positions in plain language
- Explain how P&L changes when price moves
- Recognize when you have zero exposure vs open risk
Long vs short
A long position means you benefit when price rises. A short position means you benefit when price falls. Every open trade is one of these — there is no third option.
Position
Your exposure to an asset — long if you benefit from price rises, short if you benefit from falls.
Beginners often say they are "in the market" when they have no open positions. Cash is a position too: zero directional exposure, which is often the right choice while learning.
Quiz — Test your understanding
1. If you are long EUR/USD, you profit when:
2. A short position profits when:
3. Cash with no open trades means: