A position is the exposure you hold in an asset after a trade. If you have bought and still own something you are long. If you have sold something you did not own and still owe it back you are short.
Positions are measured by quantity and value. You might hold 250 shares, 2 futures contracts, 0.8 BTC or a notional £100,000 in a currency pair. The position stays on until you close it or offset it with an equal and opposite trade.
Long and short: what type of position do you have?
Being long means you gain if the price rises and lose if it falls. You bought first, you plan to sell later. Being short means the opposite. You sold first, aiming to buy back lower. Shorts are common in derivatives and margin accounts where you can borrow the asset or take a contract that moves inversely to the price.
Examples:
- Buy 100 XYZ at £10. You are long 100 XYZ. If the price moves to £11 your unrealised gain is roughly £100 before costs.
- Sell 2 oil futures at a price equivalent to £75 per barrel. You are short 2 contracts. If the price slips to £73 you profit by the value of that £2 move times the contract size.
Size, average price and how P&L is tracked
Every position has a size, an average entry price and a current value. Most platforms show the difference between current value and your average price as unrealised profit or loss, updated with each price tick. When you close part or all of the position, the relevant portion of that P&L becomes realised.
Suppose you buy 50 shares at £20, then add another 50 at £22. Your average entry is £21. If the market is now £23, your 100 shares show about £200 unrealised profit. If you sell 40 shares at £23, you realise £80 and keep 60 shares with the same £21 average for the remainder. Fees, financing and corporate actions can change these numbers. For shorts, the arithmetic flips, since you benefit from price falls and are hurt by rises.
Derivatives and leveraged products may also involve daily interest, funding or borrow fees, credited or charged while the position is open. Exact calculations vary by product and provider.
Net, gross and hedged exposure across a portfolio
Traders often talk about gross and net positions. Gross is the sum of long and short exposure without cancelling anything out. Net is the result after offsetting longs against shorts in the same or related instruments.
If you are long 500 shares of ABC and short 300 shares of ABC, your gross exposure is 800 shares and your net exposure is 200 shares long. Hedging uses an offsetting position to reduce net exposure. The hedge might be in the same asset, a closely linked future or an index if you are trying to cover general market risk while keeping a specific holding. Correlations can shift, so hedges are rarely perfect.
Across a wider set of holdings, your positions make up your overall exposure by asset, sector, theme and currency. That bigger picture is what most people think of as a portfolio view, with concentration and diversification shaping risk.
How positions are opened, reduced and closed
You create a position by sending an order that gets executed. Buy to open creates a long. Sell to open creates a short. To reduce or exit, you send the opposite trade. If you sell fewer units than you hold, you partially close and keep a smaller open position. If you match your remaining size exactly, you flatten the position and it is closed.
Two trades can leave you flat even if you never owned the asset outright. For example, short 1 futures contract then buy 1 to close. Your net position is zero even though your gross traded volume was two contracts in total.
Most platforms display your open positions with columns for quantity, average price, current market value, and unrealised P&L. Layout and naming conventions differ by provider, but the core fields are similar.
Leverage, margin and liquidation risk
With leverage, your position’s market value can exceed your cash balance. You post collateral, known as margin, to open and maintain the trade. If losses reduce your equity below a set threshold, you may face a margin call or automatic reduction of your position. Leverage magnifies returns in both directions, so sizing and risk controls matter.
Common ways to manage risk include setting stop losses, scaling out of winners or losers in steps, and capping the share of your account that one idea can occupy. Some venues and firms apply position limits that curb the maximum size you can hold in a contract or market.
Derivative positions: futures, options and CFDs
Futures and contracts for difference mirror price moves one-for-one, so a long position profits from rises and a short profits from falls, subject to contract specifics. They are usually margined and marked to market each day.
Options create more complex position profiles. A long call gives you the right to buy the underlying at the strike, so it has positive sensitivity to price, called delta, but your loss is limited to the premium paid. A short call has negative delta and can have large potential losses if the market rallies. Puts invert that pattern. Traders often describe option positions in delta terms to compare exposures across different strikes and expiries, for example long 0.50 delta equivalent to being half a unit long in the underlying per option contract, subject to changes as delta moves.
You can also build synthetic positions. A long call plus a short put at the same strike and expiry behaves like a long forward. A covered call combines a long share position with a short call to reduce net upside in exchange for premium income. These are all positions because they leave you exposed to future price moves until you close or offset them.
Position sizing in practice
Position sizing is the decision about how big to go on an idea. Traders use fixed amounts, percentages of account equity, or volatility-based sizing that adjusts units so that a typical price move risks a consistent sum. For example, if a share tends to move 2 percent a day and you want to risk about £200 on a normal swing, you might size a position so that a 2 percent move equals £200 in P&L, then place a stop beyond that if appropriate. In leveraged markets the same logic applies but you must account for margin, funding and the possibility of gaps.
Whatever method you use, the mechanics are the same. A position is a live exposure with a direction, a size and an average price, and it stays that way until you change it.