Taking A Short Position In The Market

Taking A Short Position In The Market

Many believe that the only way to make money trading is when the market is bullish and is rising, however, there is another way too in which you can profit in the market. This is known as short selling. Here you can profit even when the market is falling.

When you want to take advantage of the falling prices then you go short on the asset. Here you first sell the futures contract and then buy it at a lower price. The difference between the sell and the buy price is your profit. This could be substantial when you trade in the futures market and even a small amount of difference can let you make a huge profit.

Short position trades

The short position is the same as a long position where you buy low and sell high. The only difference here is that you sell first at a higher price and buy low at a lower price.

  • Currency Futures

When trading in the currency futures market, traders watch for any clue for the declining inflation. This is an indication that the central bank may cut the rate of interest in order to stabilize the market. When the rate of interest is lowered it is bad news for the market and this is the time when the majority of currency future traders will start to short the currency.

  • Stock Futures

The stock market future traders watch a change in the rate of interest closely. When the rate of interest is high this means that it will be expensive for the consumers to buy the items on credit and this leads to lowering of the sales. Thus when the rate of interest is high it is time that the future traders start to short sell the stock futures.

  • Commodity Futures

When the rate of interest is high then the commodity traders see a limit in demand. This is seen as the negative outlook for commodities and thus the commodity traders will start to short sell in the commodity market.

Conclusion

As a futures trader, you should be aware of the factors that cause a positive or a negative bias towards the asset that you wish to trade on. Once you are clear of these factors you will be able to decide whether to go long or short sell the asset futures. The automated trading robot lets you short sell as well take long positions in the futures market.