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When I buy an asset and go long, then I order the asset with the BID-Price. If I sell it, then I need the ASK-Price for the sell order.

What do I need when I want to go short?

Is the following statement right?

When I enter an asset and go short, then I order the asset with the ASK-Price. If I exit it, then I need the BID-Price for the exit order of the short position.

Thanks for the answer. To sum up:

  • enter long with ASK
  • exit long with BID
  • enter short with BID
  • exit short with ASK
JohnFx
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nimo23
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3 Answers3

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When you go short, you borrow an asset and sell it, so you would enter at the BID price. To close it, you'd buy the asset back and return it to the lender, so you'd exit at the ASK price.

Note that your initial paragraph is backwards - when you go long, you buy an asset at the ASK price.

Think about it this way - ask should always be greater than bid, so if you could buy at the bid and sell at the ask you'd have instant profit, which is not possible.

D Stanley
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  • you mean "you'd buy the asset back and return it to the lender, so you'd EXIT at the ASK price." – nimo23 Sep 30 '19 at 20:04
  • @nimo23 well technically you'd enter a closing (offsetting) trade to exit the position, but yes that is what I meant. – D Stanley Sep 30 '19 at 20:16
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    actually there's a slim possibility that you could buy at the bid and sell at the ask using limit orders, assuming you can get to the front of the book, but then you're really just acting like a market maker. –  Sep 30 '19 at 22:07
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When I buy an asset and go long, then I order the asset with the BID-Price. If I sell it, then I need the ASK-Price for the sell order.

When I enter an asset and go short, then I order the asset with the ASK-Price. If I exit it, then I need the BID-Price for the exit order of the short position.

No, your statements are not right.

If you are trading at the market, you pay the ask price when you buy and you receive the bid price when you sell. It's as simple as that.

If you own the position and you sell it at the bid price, your position is gone.

If you do not own the position and you sell at the bid price, then you are short the shares.

Community
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Bob Baerker
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For stocks that have c.a. 3 cent spread.

  • to CLOSE long or EXIT short Buy Limit ASK + 0.03
  • to CLOSE long or ENTER short Sell Limit BID - 0.03

If you have SEC 201 Rule or a wide spread stock. You might want to use different combinations. The above mapping is good to begin with.

Koray Güclü
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