Going Long and Short with CFDs
Shorting a CFD is as easy as going long: if you're bearish, sell to open, and profit when the price falls.
Risk warning: forex, CFDs, options, futures and crypto assets usually involve leverage or high volatility, and you can lose more than you put in. This lesson only teaches the concepts; all numbers are for illustration and are not investment advice.
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Text version · CFDs, lesson 2: “Going Long and Short with CFDs”
Shorting a CFD is as easy as going long: if you're bearish, sell to open, and profit when the price falls.
Bullish: buy. Bearish: sell
Buying to open is going long; selling to open is going short. Shorting a CFD doesn't require borrowing the underlying first: you just sell the contract.
Pay the spread when you open
You buy at the higher BUY price and sell at the lower SELL price; the spread in between is your cost the moment you open.
Short losses have no ceiling
A long can lose at most down to a price of zero; when short, there's no ceiling on how high price can go, so in theory the loss can grow without limit. That's why shorts especially need a stop-loss set in advance and a sensible position size.
Key takeaways
- Buy to open = go long; sell to open = go short. Shorting a CFD doesn't require borrowing the underlying.
- You buy at the higher quote and sell at the lower one, so you pay the spread the moment you open.
- A short's potential loss is theoretically unlimited, so shorts especially need a stop-loss and sensible size.
Try it yourself
You can do these exercises in this lesson's interactive simulation:
- Click "Example: sell 5 units @15,000" and let the market run: when the BUY price reaches 14,800, is the floating gain +$1,000?
- Open any position and look at the P&L right away: why is it negative the moment you open? What does it have to do with the spread?
- Go long 2 units and click "Up 50 points" twice: what do your P&L and the "If you'd gone the other way" ghost on the right add up to?
- Open a short, then push the price up: feel how the loss grows when a short is on the wrong side.
Quiz and explanations
- 1. You sell 5 units of an index CFD ($1 per point), opening at 15,000 and closing at 14,800. What's your P&L?
- Answer: +$1,000.200 points × $1 × 5 units = $1,000.
- 2. Do you need to borrow the underlying before shorting a CFD?
- Answer: No.You can sell the contract itself to open.
- 3. The quote is SELL 99.8 / BUY 100.2. You buy 10 units and close immediately (with no price change). What's your P&L?
- Answer: −$4.You buy at 100.2 and sell at 99.8, losing 0.4 (the spread) per unit: −$4 across 10 units.
Terms in this lesson
- long (Long): Buy first and sell later, betting the price will rise.
- short (Short): Borrow and sell first, then buy back to return it, betting the price will fall.
- spread (Spread): The gap between the Ask and the Bid, a hidden cost on every trade.
- stop-loss (Stop Loss): Automatically closes a position when price moves against you to a preset level, capping your maximum loss.