First thing’s first…
When you hear traders say that, “Hey, I'm long on this stock!” or Hey, I'm short on this stock!”
It simply means the direction of the trade that they are taking.
When someone says they’re long it means that he will make a profit when the stock price goes up.
For example, I say I'm long Apple shares $100.
It means that I bought Apple shared at $100, and if Apple shares go up to $120, I make a profit of $20.
On the other hand, when a trader is short, a trader will profit if the stock price goes down.
How does this work?
What actually happens is that he will borrow shares from the broker so that a trader can profit when a stock price goes down.
So let's say, I'm short on Apple at $100 and I have borrowed $100 worth of shares from my broker.
If Apple per share drops down to $90 and exit my trade, what happens is that I “buy back: $100 and collect the difference/profit of $10
This is how short-selling works.
But if the stock price goes up, then it will move against you and you will experience a loss.
Also, stocks usually go up in the long-run and could go up forever from $5 per share to $1000 per share and beyond.
Which means, your losses are technically unlimited if you short a market.
Let’s move on…