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 Trading Strategies: What are Long and Short Positions?

Commodity online trading is trading on commodities futures or options. We will explain about Long Futures (Long Positions) and Short Futures (Short Positions). Major advantage is either you can go for LONG position or SHORT positions based on the commodities price trend.

What does Trading mean in the above mentioned sentence?

Trading is nothing but either we can go for LONG (buy and sell) positions or SHORT (sell and buy) positions for a commodity product.

  • Long: Buy a commodity product (GOLD) and sell it.
  • Short: Sell a commodity (SILVER) product and buy it.


Example for LONG FUTURES and SHORT FUTURES:

Exchange Symbol Expiry Date of the Contract Product Name Price in Rupees (INR)
MCX SILVER 30-Nov-10 Silver 28907
NCDEX TMCFRGNZM 20-Aug-10 TurmericNIZAMABADAUG2010 14702

With the above mentioned example in table, we will explain what is LONG and SHORT.


LONG POSITION: Based on the market trend, you come to an assumption that SILVER commodity price will increase.


››› On 19th July 2010, you buy SILVER at Rupees 28,907 in 30-NOV-2010 contract in MCX exchange using an online trading terminal (India InfoLine, ICICI, Geojit etc). You set the target to Rupees 30,000. Your assumption was right and SILVER price increases to Rupees. 30,000 on 7th of August 2010. Since it has met your expected target, you sell silver at 30,000 in MCX Exchange in 30-NOV-2010 contract. So you get profit around Thirty Thousand Rupees for this transaction. If your entry point is correct, you can make this profit within one to two days. ‹‹‹


SHORT POSITION: Based on the market trend, you come to an assumption that TURMERIC commodity price will decrease.


››› On 19th July 2010, you sell TURMERIC at Rupees 14,702 in 20-Aug-2010 contract in NCDEX Exchange using an online trading terminal (India InfoLine, ICICI, Geojit etc). You set the target to Rupees 14,500. Your assumption was right and TURMERIC price decreases to Rupees 14,500. on 7th of August 2010. Since it has met your target, you sell TURMERIC at 14,500 in NCDEX Exchange 20-AUG-2010 contract. So you get profit around Ten Thousand Rupees for this transaction. If your entry point is correct, you can make this profit within an hour also. ‹‹‹


Conclusion:
Whether you go for LONG OR SHORT positions, your have to get in and get out at the right price and make huge profits. In the later sections, you will come to know about the gross profit, brokerage, and net profit.





Margin needed to trade on NCDEX Commodities       Trading Strategies: Headers in Online Trading Screen





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