I keep seeing the term ‘sell to close’ but I’m not clear on what it means.
I’ve watched a few trading videos, but they didn’t really explain it well. Is it just about closing your position or something else?
I would appreciate a simple breakdown.
Sell to close means you’re exiting a position that you already own. For example, if you purchased 100 shares of Apple at $150 each and the price goes up to $160, selling to close enables you to take your profit. On the other hand, if the price drops to $140 and you want to minimize your loss, sell to close also applies. It’s simply about closing out your current position, not initiating a new one.
‘Sell to close’ means you are closing a position you own. For instance, if you bought a call option, selling to close means you’re selling that option to exit the trade.
This differs from ‘sell to open’, which refers to starting a new short position.
It’s simply closing a long position to realize profits or cut losses.
Sell to close exits a purchased position. It converts unrealized gains or losses into real cash.
When I started trading, I mixed this up with short selling and panic-sold a gold position for a $200 loss.
Sell to close just means you’re getting out of a position you already bought. Same as selling any stock you own.
Learned this after I accidentally kept opening new EUR/JPY positions instead of closing my first one.