What Is Your Choice? — 4 Positions of Futures Trading
Imagine a small house with a front door and a back door. The name of the house is Contract. The gatekeeper in front of the house asks you one question before you enter the house. “Will the price of this house go up or down when you leave this house? Choose one.”
Beginners of futures trading might be embarrassed by unfamiliar terms of futures. One of the most embarrassing things might be that there are four options in futures while there are just two options, buy and sell, in spot. The four options of futures trading are Open and Close, Long and Short positions, respectively.
Futures trading is a system that gets profit and loss according to future price fluctuations. So it is important to understand the market fluctuation trend and choose the future price carefully. Will the price go up or down at some point in the future? Long and short positions reflect your choice of future price fluctuations. If you think the price will go up, choose the Long position. If you think the price will go down, choose the Short position.
Then what position is Open and Close? Each refers to the beginning and end of the contract of futures. Unlike the spot, futures has different points between when the contract is filled and when the contract is completed, so two positions are needed to distinguish these points. If you started the contract, you would have an Open position. If you closed the contract, you would have a Close position.
Let’s go back to the Contract House. The gatekeeper asks you before entering the Contract House. “Will the price go up or down in the future?” This means “What is your choice, Long or Short position?” After listening your choice, the gatekeeper will open the front door called Open position to you. You will go into the Contract House and watch the price fluctuation trend. When you think you are in the right point, go out to the back door called Close position. You will be rewarded with the result of your choice — profit or loss.
Open and Close, Long and Short positions are combined each other. For example, if you have an Open Long position, you are the one who thinks the price will go up, and who started the contract as you thought. Conversely, if you have a Close Short position, you are the one who thinks the price will go down, and who completed the contract that had been opened.
Have you become more familiar with these four positions of futures trading now? The gatekeeper is waiting for your answer, and the door of the Contract House is always open to you. Take your step. Your choice will make your life more richer.
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