Open Position refers to any trade that has been established or entered but has not yet been closed with an opposite trade.
There can be an open position after a buy (long) or sell (short) order.
- Long Position: If you purchase a security with the expectation that the asset will appreciate in value, you have an “open long position” in that security. The position will remain open until you sell the security, at which time the position will be closed.
- Short Position: If you sell a security that does not belong to you (a common practice of short selling) and you expect the value of the asset to fall, you have an “open short position.” The position will remain open until you buy back the security (also known as closing the position) and close the position.
When a position is open, the trader’s net worth will fluctuate with the market value of the position.
No profit or loss is realized during the holding period; when the position is closed, the profit or loss will be realized.
It is important to note that open positions are risky – the longer you keep them open, the greater the chance that the market will move against your position, potentially resulting in losses.
However, many trading strategies involve holding a position open for a certain period of time in order to reap profits, depending on the trader’s risk tolerance and market outlook.
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