Short Position

A short position makes money when the exit price is below the entry price, after costs. In shares, shorting means borrowing shares and selling them, which introduces borrow fees and the risk that the borrow is recalled. In futures, selling the contract is symmetrical with buying it, with no borrow, which is why futures are the cleaner teaching case. A short has theoretically unlimited loss if price rises without a bound, which is why a stop, and a size that assumes the stop can slip, is not optional. "Short" is the direction, not a holding period.

The stop on a short sits above the invalidation, a swing high, a failed breakdown that reclaimed, a level. The target sits at the next support, the next liquidity pool, or a measured move. Because rallies can squeeze, a short in a strong uptrend needs a better level than "it looks extended." Borrow, locate, and the uptick or circuit rules of the venue can stop you from entering or from staying. Know them for the market you trade before you need them.

Short breakdowns that are accepted, or failed breakouts at resistance, with the higher timeframe at least not fighting you. Cover into support the same way a long takes profit into resistance. Holding a short through a major support because the thesis is grand is how a good entry becomes a donated profit. If the venue makes the borrow expensive, include that cost in the target or skip the name.

Shorting a rising market only because a ratio or an oscillator is high. Extended can stay extended. Also sizing a short like a long and ignoring the squeeze. And confusing selling a long position, which flattens you, with opening a short. The first exits risk. The second creates it.

Stops do not cap a short at the planned loss when the halt, the gap, or the borrow works against you. In cash equities the short can be forced flat. In a limit-up future you may not be able to buy. These are not edge cases for overnight shorts into events. They are the risk. Reduce size or stand aside when the exit is not reliably available.