Position
A position is the amount of an asset or contracts you currently hold or owe, together with its direction — long or short.
When you buy shares, you have a position. When you sell them, you close it. The idea is simple, but it is the unit everything else in trading is built on: profit and loss, risk, margin and exposure are all measured per position. This entry explains opening, adding to and closing positions, long and short positions, and how to keep track of what you hold.
- Category
- Trading Basics
- Reading time
- 4 min
- Also called
- Trading position, Flat, Opening and closing a position
- Updated
A position in plain words
A position is what you have on right now. Own 100 shares: you have a long position of 100.1 Owe 100 borrowed shares after selling them: you have a short position of 100. See Long Position and Short Selling.
When you hold nothing in a market, you are “flat”. Closing a position realises its profit or loss.2 See Profit and Loss.
The life of a position, step by step
Plan it
Entry, stop, target and size before you start. See Trading Plan.
Open it
A buy opens a long; a sell of something you do not hold opens a short.
Size it
Quantity based on the risk you accept. See Position Sizing.
Manage it
Move stops, take partial profits or add, according to your rules. See Trade Management.
Close it
An opposite order of the same size. Closing a long means selling; closing a short means buying back.
Record it
Log the result and the reasons. See Trading Journal.
Worked examples
Example 1 — Opening and closing a long
ClosedBuy 150 shares at $20, later sell 150 at $23.
| Position while open | Long 150 |
| Position value at entry | $3,000 |
| Result when closed | 150 × $3 = $450 |
Selling the same quantity closes the position and leaves you flat.
Example 2 — Partial close
Scaling outYou hold long 200. You sell 100 at a target and keep the rest with a stop at breakeven.
| Remaining position | Long 100 |
| Profit on the closed half | Realised |
Positions can be reduced in steps. See Scaling In and Out.
Example 3 — Accidentally reversing
ErrorYou hold long 100 and mistakenly enter a sell of 200.
| First 100 | Closes the long |
| Next 100 | Opens a short |
| New position | Short 100 |
On many platforms, selling more than you hold opens an opposite position. Check sizes when closing.
Long and short positions
| Aspect | Long | Short |
|---|---|---|
| Opened by | Buying | Selling borrowed assets or contracts |
| Profits when price | Rises | Falls |
| Closed by | Selling | Buying back |
| Maximum loss (shares) | Amount invested | Unlimited in theory |
Why thinking in positions helps
Risk per position
Each position should have a defined maximum loss. See Risk per Trade.
Total exposure
Adding up positions shows your overall risk. See Exposure.
Margin
Leveraged positions tie up margin. See Margin.
Netting
Some accounts combine buys and sells into one net position. See Net Position.
Advantages and disadvantages
Advantages
- A clear unit for measuring risk and results.
- Makes it easy to see what you hold at any time.
- Supports partial closing and scaling.
Disadvantages
- Many small positions can hide one big combined risk.
- Platforms handle netting and hedging differently.
- Open positions carry overnight and gap risk.
- Leveraged positions can be closed for you. See Liquidation.
Going deeper
Read as far as you need. Each level builds on the one before it.
Position value vs. risk
Beginner
A $10,000 position with a stop 2% away risks about $200. Size and risk are not the same thing.
Correlated positions
Intermediate
Several positions in assets that move together behave like one larger position. See Correlation.
Netting vs. hedging accounts
Advanced
Some platforms let you hold a long and a short in the same instrument at once; others net them into a single position. Know which your account uses. See Hedging.
Common mistakes
No exit plan
Decide the stop before opening.
Closing the wrong size
Check quantities to avoid reversing.
Too many open positions
Total risk adds up quickly.
Forgetting positions held overnight
Know what you hold before markets close.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- A position is what you currently hold or owe, with its direction.
- Longs profit from rises; shorts from falls.
- Closing means an opposite order of the same size.
- Measure risk per position and across all positions.
- Check sizes to avoid accidentally reversing.
Frequently asked questions
What does it mean to be flat?
What is an open position?
Can I hold a long and a short at the same time?
Further learning
- Long Position
The most common type of position.
- Short Selling
Profiting from falling prices.
- Position Sizing
Deciding how large a position should be.
- Profit and Loss
Measuring what a position made.
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.
- Investor.gov (SEC). Stock Purchases and Sales: Long and Short (opens in a new tab) Checked .
- Investor.gov (SEC). Capital Gain (glossary) (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.