Imagine borrowing a book worth $20 and selling it. If the price falls to $15, you buy it back, return it and keep the $5 gap. That is a short: sell first, buy back later. If the price rises instead, you pay more to buy it back, which is why shorts need a stop loss.

You can trade a market in two directions. Long means you buy first and sell later, so you profit when price rises. Short means you sell first and buy back later, so you profit when price falls.

Traders also describe their view with two words. If you expect price to rise, you are bullish, and going long is the bullish trade. If you expect price to fall, you are bearish, and going short is the bearish trade.

Say you think gold will fall. You sell at $4,150, the price falls to $4,100, and you close the trade at $4,100, your target profit. The difference, $50, is your profit. Your broker handles the mechanics, so you do not need to own any gold first. Prices are illustrative.

On the same chart, a long and a short are opposites. When price rises, the long wins and the short loses. When price falls, the short wins and the long loses. Neither is better; it depends on direction.

A short loses when price rises, and price can keep rising. A stop loss closes the trade at a set price and caps the loss. Without one, the loss keeps growing.

To open a trade, buy opens a long and sell opens a short. To close it, you do the opposite: sell closes a long and buy closes a short. It is the same ticket either way.

Long: buy first, profit when price rises. Short: sell first, profit when price falls. The same rules apply either way: a stop loss and a small size.