Bull or Bear, Long or Short — Basic trading terms

Bull or Bear? Long or Short? Trading terms got you confused? Our short glossary is here to help you!

We use a simple example to explain what basic terminology like bull or bear market, market trend, long,short or flat position, short selling etc mean.

Bull and Bear

You can have two opinions about a security, the price will go up or come down:

• If you believe that prices of your asset are likely to increase, you are bullish. Broadly, if a broad market index is going up during a time period, it is referred to as bull market
• If you believe that prices of your asset are likely to go down, you are bearish. Broadly, if a broad market index is declining during a time period, it is called a bear market
• The general direction that the market is moving in is called a trend. If the markets are falling, the trend is bearish. If the market is showing no visible movement, the trend is said to be sideways.

Long and Short

In trading you can take two positions on a trade:

• —If you buy an asset, your position is long. When long an asset, you benefit if the price of the asset increases
• —If you sell an asset, your position is short. When short an asset, you benefit if the price of the asset decreases
• If you have a short position, you have sold something you don’t own. This concept is called short selling. This is made possible by borrowing it from an owner of the asset and selling to a buyer, with the intention of buying it back later(ideally at a lower price) and returning to the owner.

In a long trade, the potential losses are limited to 100% of the position but a short trade may lose more than 100%, if the price of the asset more than doubles.

Trading Positions

Position is the amount of security or asset owned

• Flat Position — When your overall position is zero
• Close Position — Trade out of your position. If you are long, closing the position means selling the asset. Similarly, when you are short, closing the position means buying the asset back. It is important to note that when you are selling the asset to close an existing long position, you are not shorting the asset, and vice versa!
• Intraday position — Trading position which is expected to be closed within the same day

Put it all together..

AAPL is trading at a 100$

• You believe that price of AAPL stock is likely to increase, you are bullish
• You buy 100 shares of AAPL, your position is long
• The value of AAPL does go up steadily over the next few days, the trend is bullish
• When AAPL reaches 120$, you sell out 50 shares, you are closing half your position. However you still own the remaining 50 shares, and your position is still long
• For the next few days, prices fluctuate between 119$ and 121$, the market is showing no visible movement and the trend is sideways
• Eventually you sell the remaining 50 shares at 120$. You have now closed your position and have a flat position
• Stock then rises to 130$. You think this is too high, you are now bearish, you sell 50 more shares at 130$. Now, your position is short

Other terms:

• Exchange Listed — Any stock or asset that can be bought or sold on an exchange is said to be exchange listed. The exchange matches the buyer and seller of the asset and makes trade information to all market participants
• All time high/low — All time high is the highest point at which an asset has ever traded from the time it started trading on an exchange and all time low marks the lowest point at which an asset has traded from the time it has been listed. Similarly we also have 1 year/1 month/1 week high/low which provide the range within which the asset has traded during that time period.
• Volume — Volumes represent the total transactions (both buy and sell put together) for a particular asset on a particular day.