Open and Closed Positions
An open position is a trade you still hold, whose result changes with the price; a closed position has been exited, so its profit or loss is final.
An open Position is a trade you still hold, so its result moves with the price. Closing it locks in the outcome. Understanding the difference helps you read Realized and Unrealized P&L and manage risk.
- Category
- Trading Basics
- Reading time
- 3 min
- Also called
- Open trade, Closed trade, Closing out
- Updated
Open and closed positions in plain words
Contracts that have been traded but not yet offset or settled by delivery are counted as open interest — in other words, open positions.1
It defines liquidation as the closing out of a long position, while closing a short is more often referred to as covering.1
A round turn is a full trade cycle: a purchase plus the sale that closes it, or a sale plus the purchase that covers it.1
How a position opens and closes
Open the position
Buy to go long, or sell to go short; a short sale means selling stock you do not own.2
Track the open result
While open, the result changes with every price move.
Set exits
Place a stop-loss and a target before the market moves.
Close with the opposite trade
Offsetting means selling what you bought or buying back what you sold.1
Choose the order type
A market order closes immediately at the going price.3
Record the closed result
Once the round turn is complete, the result is final.1
Worked examples
Example 1 — Closing a winning long
Gain locked inA hypothetical trader buys 10 shares at 40 and later sells them at 44.
| Open | 40 |
| Close | 44 |
Selling the shares is liquidation, the closing out of a long position, so the gain of 40 is now final.1
Example 2 — Covering a losing short
Loss locked inA hypothetical trader sells short at 25 and buys back at 27.
| Open short | 25 |
| Cover | 27 |
Closing a short is called covering, and buying back higher makes the loss final.1
Example 3 — Still open
Result not finalA hypothetical position bought at 15 now trades at 15.20, and the trader holds on.
| Entry | 15.00 |
| Now | 15.20 |
The trade has not been liquidated by an offsetting transaction, so the result can still change.1
Open vs closed position
| Aspect | Open | Closed |
|---|---|---|
| Result | Changes with price | Final |
| P&L type | Unrealized | Realized |
| Risk | Still exposed | No market risk |
| Costs | May incur financing | Fees settled |
Where this matters
Risk control
Limiting Exposure from open trades.
Reporting
Separating Realized and Unrealized P&L.
Exits
Using a Stop Loss or Take Profit.
Review
Logging closed trades in a Trading Journal.
Advantages and disadvantages
Advantages
- Clear line between paper and final results.
- Helps plan exits in advance.
- Makes reviewing trades easier.
- Clarifies how much risk is live.
Disadvantages
- Open positions can gap overnight.
- Holding costs can add up.
- Closing too early can cap gains.
- Partial closes complicate records.
Going deeper
Read as far as you need. Each level builds on the one before it.
Offsetting
Beginner
Offsetting closes a position: sell what you bought, or buy back what you sold short, in the same amount.1
Long and short exits
Intermediate
Liquidation is the closing out of a long position, and closing a short is more often called covering.1
Round turns
Advanced
A round turn combines the opening and closing trades into one completed transaction, which is how many traders count trades.1
Common mistakes
Treating open gains as banked
Unrealized results can vanish.
Holding with no exit
Set a stop before entry.
Forgetting short risk
Losses on a short can keep growing.
Not recording closes
Log every closed trade.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- An open position is still exposed to price.
- Closing needs an opposite trade.
- Closing a long is liquidation.
- Closing a short is covering.
- Closed results are final.
Frequently asked questions
Is an open profit real?
Can I close part of a position?
Does closing cost anything?
Further learning
- Position
What a position is.
- Realized and Unrealized P&L
Paper vs final results.
- Stop Loss
Planned exits.
- Trade Management
Managing open trades.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- U.S. Commodity Futures Trading Commission. CFTC Glossary (opens in a new tab) Checked .
- Investor.gov (SEC). Short Sales (opens in a new tab) Checked .
- U.S. SEC (Investor.gov). Types of Orders (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.