Long, short and planned exits
Explain a hypothetical position and why an exit is uncertain.
Technical terms explained
Long and short
Long means buying the base currency against the quote; short means selling it against the quote.
Stop loss
An order or rule intended to close a position when an adverse price level is reached.
Take profit
A planned favourable exit level or order. It is a target, not a guaranteed outcome.
Entry price
The price where a position is opened or where a hypothetical observation assumes opening.
A long base-currency position benefits from a rise in the pair before costs; a short benefits from a fall. A stop describes an exit condition intended to limit loss. A take-profit order describes a planned favourable exit. Ordinary stops do not guarantee the fill price during gaps or poor liquidity. The platform’s order rules matter.
Our operational rule
For a simple long example: stop < entry < target. For a short: target < entry < stop.
Worked example
A hypothetical long at 1.0800, stop 1.0780 and target 1.0840 has 20 pips of planned downside and 40 of upside, before costs.
Counterexample
A stop placed above a long entry does not represent the initial downside distance in this simple example.
Watch for this mistake
Confusing a planned stop loss with the largest possible actual loss.
Charts are synthetic. These classification rules are not evidence of profitability.
Source and conventions
OANDA · FX mechanics reference
Broker documentation supports standard quote/position mechanics. Contract terms and execution conventions can differ. No broker endorsement.
Read the source