Trading CFDs: A discussion on Long Positions

CFDs have the ability to be traded both for long and short positions. For newbies in the field of trading CFDs, both the long and short positions are important concepts that need to be familiarized with. In our discussion, we shall focus on the main features and advantages of short positions.

Short vs Long Positions

These two trading concepts obviously oppose each other. As a starter, long positions are decisions that stock owners have to make with a hope that their acquired asset will have an increased value over time. Short position on the other hand is a decision made by traders to buy stocks that have low value and hope that these will increase its value as time passes by.

The Bullish Market for CFDs

This is a market where derivatives and CFD trading enthusiasts speculate on the rate of the traded merchandise. This market is where you can find assets being traded based on its fluctuations in the market without the burden of actually owning it.

Classifications of Long Positions

CFD Long Trading

Taking a long position with CFDs as your instrument allows you to trade even when you do not have enough capital to buy an actual asset. This can be done with the use of margins. More often than not, brokers establish at least 10% margin for basic instruments such as stocks. Using your margin, you are now ready to settle the leverage for your contract.

Futures Long Trading

This position is used to hedge over the risks of severe movement of rates in the market. Apart from futures, traders also deal with forwards to do the job. To perform this position, a trader or company must decide to set a lock in buying rate for an expected future commodity. Contrary to other derivatives such as options, futures does not allow a trader to choose his actions in the market. It is the seller who sets if a certain asset is going either bought or sold in the future.

Options Long Trading

The long position holder is a trader who is presently handling the instrument in his portfolio. An Option writer is actually a term used for the seller of call option. If a trader purchases the said instrument from him, these merchandise means that they are placed in a long position because of their ability to buy the said asset.

Bonds and stocks long position

This position is one of the conventional ways to trade in capital markets. This position is usually practiced during the investor's purchase of an instrument with hopes that the rates will increase soon.

Final word:

With the illustration of the instruments under long position, we can say that when trading CFDs, such decisions are usually adopted by traders. One must remember that these instruments also pose advantages and disadvantages. Among these disadvantages are : suffering of abrupt price changes/short-term moves and possibility of expiry prior to the realization of its advantages. In contrast, traders still hold unto this position because of the undeniable advantages in terms of rate lock ins and limit of losses.

Nirman Sharma is a marketing blogger and sales expert with many years of experience working at a major B2B company. He currently writes guest posts on Digital Marketing for Eduburg, known as best digital marketing institute in Delhi.