An open position refers to any established or entered trade that has not yet been closed with an opposing trade. An open position can arise after a buy (long) or a sell (short) order.

Long Position: If you have purchased a security with the expectation that its value will increase, you hold an “open long position” in that security. This position remains open until you sell the security, at which point it is considered closed.

Short Position: If you have sold a security that you do not own (a common practice in short selling), anticipating that its value will decrease, you have an “open short position.” This position stays open until you buy the security back (also known as covering), which closes the position.

While a position is open, a trader’s equity will vary with the market value of that position. Any profit or loss is considered unrealized while the position remains open; these profits or losses become realized once the position is closed.

It is crucial to understand that open positions carry risk – the longer a position is kept open, the greater the likelihood that the market may move against it, potentially leading to a loss. However, many trading strategies involve maintaining positions open for a specific duration to capture gains, depending on the trader’s risk tolerance and market outlook.