Trading Buying Power: Understand Long and Short Orders to Make Profits

Want to succeed in the financial investment field, the first step is to master basic concepts. Among them, what is a long order and what is a short order are two terms that every trader needs to understand clearly. This article will explain in detail these two types of positions, how to use them, and practical applications.

Position (Vị Thế) Là Gì?

In trading, position or “vị thế” simply refers to the trader’s holding status after executing a buy or sell order. When you place an order and it matches successfully, you will hold a long position (long) or a short position (short).

Giới Hạn Vị Thế - Điều Cần Biết

Each trading product has limits on the number of positions a trader can hold. This regulation exists to:

• Protect market transparency
• Prevent large investors from manipulating prices
• Protect the rights of small traders

Traders need to understand these limits to avoid missing trading opportunities when exceeding regulations.

Lệnh Long Là Gì? Hướng Dẫn Chi Tiết

Long order (buy) is a buy order, indicating the trader’s prediction that the price will rise. This is a method to profit from the increase in the trading asset’s price.

Real-Life Example of a Long Order

Scenario 1: Stocks

• You buy 1 lot of Tesla stock at $150.42 per share
• Using leverage 1:10
• Planning to take profit at $160, stop-loss at $140
• You are holding a long position

Scenario 2: Forex

• You buy EUR/USD at 1.05867
• Volume of 0.01 lots, leverage 1:30
• Believing the Euro will appreciate against the USD

When to Use a Long Order?

Traders often apply long orders in cases such as:

1. Positive Technical Signals

• Price breaks major resistance levels
• Indicators like RSI, MACD give bullish signals
• Formation of piercing candlestick patterns or double bottom
• Moving averages trending upward

2. Positive News and Events

• Announcement of lower-than-expected inflation
• Strong GDP growth data
• Unemployment rates decrease
• Companies releasing earnings reports exceeding expectations

3. Overall Market Trend

• The market is in an uptrend phase
• Investor sentiment is optimistic
• Key indices continuously reaching new highs

Lệnh Short Là Gì? Kiếm Lợi Từ Giá Giảm

Short order (sell) is a sell order, reflecting the view that the price will decline. This is a way for traders to profit when the market goes down.

Real-Life Example of a Short Order

Scenario 1: Stocks

• You sell 3 lots of Apple stock at $134.43 per share
• Leverage 1:10
• Expecting the price to decrease in the near future

Scenario 2: Forex

• You sell USD/JPY at 136.71
• Volume of 0.02 lots, leverage 1:50
• Forecasting the Yen will appreciate

When to Use a Short Order?

Traders apply short orders when:

1. Bearish Technical Signals Appear

• Price breaks below key support levels
• MACD crosses down the signal line
• Formation of double top or inverse head-and-shoulders patterns
• Bollinger Bands expanding downward
• Moving averages pointing down

2. Negative News and Events

• Unexpected high inflation data
• GDP growth slowing down
• Central banks tightening monetary policy
• Companies reporting disappointing earnings

3. Currency Dynamics For example: When USD strengthens due to rising interest rates, you might:

• Short EUR/USD (because Euro is weaker)
• Long USD/JPY (because USD is stronger)

Comparing Advantages and Disadvantages: Long Vs Short

Frequently Asked Questions

Q: Should I use short orders?
Yes, especially when the market is clearly in a downward trend. Short orders help you profit from declining prices. However, a strict risk management plan is essential.

Q: Are long orders supported in all markets?
Yes. Long orders are the most common type and are supported across all markets including stocks, forex, commodities, and derivatives.

Q: Are short orders available everywhere?
Not entirely. In some underlying stock markets (such as Vietnam), short orders are restricted. However, they are fully permitted in forex, futures, and international derivatives exchanges.

Q: Should I use both long and short orders simultaneously?
Not for the same product. Doing so only incurs trading costs without actual profit. However, you can apply this strategy across different currency pairs when USD is strengthening:

• Short EUR/USD
• Long USD/JPY

Understanding clearly what a long order is and other trading mechanisms forms the foundation for developing your trading skills. Start with simple strategies, good risk management, and continuously improve your analytical skills.