Definition
Going long means buying a futures contract with the expectation that prices will rise. Going short means selling a contract expecting prices to fall. Long strategies are bullish. Short strategies are bearish.
Understanding Long vs. Short Positions in Futures
When you trade futures, you’re not just speculating on prices going up. You can also profit when prices drop. That’s because futures let you take either a long or short position, depending on your market outlook.
- Going long = you buy a contract, hoping to sell it later at a higher price.
- Going short = you sell a contract first, aiming to buy it back later at a lower price.
Both actions involve opening and closing positions, but in opposite sequences. Importantly, you don’t need to own anything to go short in futures. You’re simply opening a position in the market.
What Happens When You Go Long?
Let’s say you think natural gas prices will rise. You buy (go long) one Micro Natural Gas contract (/MNG), which represents 2,500 MMBtu of natural gas. If the price goes up, you can sell the contract for a profit.
- If you buy at $3.00 and sell at $3.20, that’s a 20-cent gain. Conversely, if the market goes against you and you sell at $2.80, that’s a 20-cent loss.
- Multiply that by the contract size (2,500) and you’ve made a $500 gain (or loss), minus fees.
Going long is how you profit from bullish moves in the market. But if prices drop instead, you’ll take a loss.
What Happens When You Go Short?
Now let’s say you expect the Nasdaq to fall. You sell (go short) one E-mini Nasdaq-100 contract (/NQ) at 19,000. If the index drops to 18,800, you buy back the contract and profit from the 200-point decline. Alternatively, if the market rallies to 19,200, that will result in a 200-point loss.
- Each /NQ point is worth $20.
- A 200-point move equals $4,000 in gains (or losses), minus fees.
This is how traders profit from bearish moves by selling high first, then buying back lower. Of course, if the price goes up instead, the trade loses money.
Managing Risk When Going Long or Short
No matter which direction you’re trading, risk management is essential. Futures are highly leveraged, which means gains can grow quickly, but so can losses.
Here are some key principles to manage risk on both long and short trades:
1. Use Stop Orders
- For long trades, use a sell stop below your entry price to cut losses if the market drops.
- For short trades, use a buy stop above your entry price in case the market rallies against you.
- Always place stops at a level that reflects your acceptable loss,not based on guesswork.
2. Size Positions Wisely
- Just because your account allows multiple contracts doesn’t mean you should use all your margin.
- Smaller position sizes can reduce the emotional impact of losses and help you stay consistent.
3. Set a Risk-to-Reward Ratio
- Before you place a trade, determine how much you’re willing to risk versus how much you hope to gain.
- A common target is 1:2, or risking $500 to potentially make $1,000.
4. Avoid Overtrading
- Chasing trades, revenge trading, or trading too frequently can compound mistakes.
- Focus on high-quality setups and stick to your plan.
5. Monitor Volatility
- Higher volatility increases the risk of slippage, gapping, and wider bid-ask spreads.
- In fast-moving markets, be cautious with market orders and widen your stop distances accordingly.
Long and short trades both offer opportunity, but without a clear risk plan, you’re trading on hope. The most successful futures traders treat risk management as their top priority, not an afterthought.
Flattening Your Position
A position is “flat” when you no longer hold any open contracts — your long and short trades are fully closed. For example:
- If you’re long 2 contracts and sell 2, you’re flat.
- If you’re short 1 contract and buy 1, you’re flat.
Keeping track of your position size is key. Positions are shown as positive (long), negative (short), or zero (flat).
Examples of Going Long and Short
Example 1: Mia Goes Long Micro Silver Futures
Setup:
Mia believes silver prices will rise due to geopolitical uncertainty. She buys 3 Micro Silver (/SIL) contracts at $26.00. Each tick in /SIL is worth $5, and the contract moves in 0.005 increments.
Execution:
Mia’s position gains value as silver rises. When the price reaches $26.80, she closes her trade.
- 80 cents = 160 ticks (0.80 / 0.005).
- $5 x 160 ticks x 3 contracts = $2,400 gain.
She subtracts commissions and is left with a strong profit, thanks to the upward move.
Example 2: Brandon Goes Short E-mini Russell 2000 Futures
Setup:
Brandon expects small-cap stocks to underperform. He shorts 2 /RTY contracts at 2,000. Each point is worth $50 per contract.
Execution:
The index drops to 1,960. He buys back the contracts to close the trade.
- 40-point move x $50 x 2 contracts = $4,000 profit.
Brandon capitalized on a bearish move using a short futures strategy.
How Do You Open Long or Short Trades?
You can go long or short by placing a buy or sell order through your trading platform. Which order type you use depends on how you want to enter the trade:
- Buy Market Order: Go long at the best available ask price.
- Sell Market Order: Go short at the best available bid price.
- Buy Limit Order: Go long only if the price drops to your desired level.
- Sell Limit Order: Go short only if the price rises to your target level.
- Buy Stop Order: Trigger a long entry if price breaks higher.
- Sell Stop Order: Trigger a short entry if price drops lower.
Order types help you control risk, timing, and execution in both long and short trades.
Key Takeaways
- Long = buy low, sell high.
- Short = sell high, buy low.
- You can profit in both rising and falling markets.
- Order types like stop and limit orders help you manage risk.
- Going long or short does not require owning the underlying asset.
Whether you’re bullish or bearish, futures allow you to express your market view with leverage and precision.
Now that you understand what it means to go long or short, the next step is knowing which contract to trade. In the next article, we’ll explain how to identify the most active futures contract, why volume matters, and how rollover dates affect your positions.
Frequently Asked Questions
What does it mean to go long in futures trading?
Going long means you’re buying a futures contract expecting prices to rise. You profit by selling the contract later at a higher price than your entry point.
What does it mean to go short in futures trading?
Going short means you sell a contract first, aiming to buy it back later at a lower price. This allows you to profit from falling markets without owning the underlying asset.
Can I go short in futures without borrowing anything?
Yes. In futures trading, short selling is built into the system. There’s no need to borrow shares or assets, you simply place a sell order to open a short position.
How do I manage risk when trading long or short?
Use stop-loss orders, size your trades conservatively, and follow a defined risk-to-reward ratio. Monitoring volatility and avoiding overtrading are also key to staying in control.
How do I close a long or short position?
You close a long position by selling the same number of contracts you bought. You close a short position by buying back the same number of contracts you sold. This returns your position to “flat.”
What order types should I use to go long or short?
Use market orders for fast entries, limit orders for price control, and stop orders to trigger entries based on momentum. For example, a buy stop can open a long trade during a breakout, while a sell stop can enter a short position on a breakdown.