Difference between Long and Sell Orders: A Practical Guide for New Traders

2025-12-26 09:38:47

To succeed in financial trading, the first step for traders is to master basic concepts. Today, we will delve into the two most important terms that every investor must understand: what is a short order and strategies to use them effectively.

Trading Positions - The Foundation of Everything

Before discussing short or long orders, we need to understand the concept of “position” (position). This is the state of holding an open trading order — it can be a buy or sell order. When a trader successfully matches an order, they will have a new position.

Position Limits Issue

Each financial product has its own regulations regarding the maximum number of positions that can be held. These regulations protect transparency and prevent large investors from manipulating prices. Traders need to be aware of these limits to avoid order cancellations or missing trading opportunities.

Short Order: Profit from Decline

Contrary to common belief, you can profit when prices go down. What is a short order? Simply put, it is a sell order of a financial product with the expectation that the price will decrease.

How a Short Order Works

Let’s look at a specific example: a trader opens a sell order for Apple stock at $134.43 per share with 03 lots and 1:10 leverage. If the price indeed drops, the trader profits. Similarly, in the forex market, a sell order for the USD/JPY pair at 136.71 with 0.02 lots and 1:50 leverage can also be advantageous when the yen strengthens.

When to Use a Short Order?

When technical signals indicate a downward trend
When fundamental data is poor (high inflation, slow economic growth)
When market sentiment is negative, causing investors to sell off en masse

A typical example: in the latter half of 2022, as central banks tightened monetary policy, the USD appreciated strongly. Traders who caught this signal with a short order on EUR/USD made significant profits.

Technical Tools to Support

To determine the right time to open a short order, traders can use:

Double top price pattern (two peaks)
Trend lines and price channels
Indicators like MACD, Bollinger Bands, MA

For example, on the USD/JPY chart, when MACD crosses below the signal line and the histogram expands downward, it’s a strong sell signal.

Long Order: The Traditional Approach

Long order (buy) is the action of purchasing a financial product with the expectation that the price will rise. For Tesla stock, a trader might open a buy order at $150.42 per share with 1 lot and 1:10 leverage. In the forex market, buying EUR/USD at 1.05867 with 0.01 lots is a typical example.

Strategies for Opening a Long Order

When macroeconomic indicators are positive: low inflation, GDP growth, decreasing unemployment rate
When price patterns indicate a reversal upward (like piercing candles)
When market sentiment is optimistic

Supporting Tools for Long Orders

Use piercing candles, pin bottoms, double bottoms, and indicators like RSI, Ichimoku. For example, Microsoft’s chart shows that after a downtrend, a piercing candle pattern appears — a clear signal to open a long position.

Comparing the Two Strategies

Aspect	Long Order (Buy)	Short Order (Sell)
Advantages	Profit when prices rise; can hold physical assets; receive dividends (if stocks)	Profit when prices fall; advantageous in long-term bear markets
Risks	Losses if prices suddenly drop; during high volatility, investors often sell off	Losses if prices rise; no ownership of physical assets; may be forced to buy back during spikes

Frequently Asked Questions

Are short orders riskier?

Both types of orders carry similar risks if not managed properly. The key is accurate trend prediction and setting appropriate stop-loss levels.

Is short selling allowed in Vietnam?

On the Vietnamese stock exchange, short selling is not yet permitted. However, it is applied in derivative markets (Forex, commodities, indices).

Should I long and short the same product simultaneously?

It’s not recommended. This strategy wastes trading costs without generating profit. However, you can long one currency pair (USD/JPY) and short another (EUR/USD) if analysis indicates different trends.

Is it easier to predict an increase or decrease?

Both depend on the trader’s analytical skills. The difference lies in psychology — many fear short orders because of “unlimited losses,” but with tight stop-losses, risks are comparable.

Mastering how to use short and long positions not only helps you profit but also protects your assets during market volatility. Start with a demo account and practice these strategies before trading live.

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