Forex markets use the same terms to express market positioning as most other currency day trading markets do. Since the currency trading involves simultaneous buying and selling, being clear on the terms helps, especially if you’re totally new to financial market trading.
Going long means to a market position in which you bought security. In forex, it refers to having bought a currency pair. When you’re long, you’re hoping that prices go higher so you can sell at a higher price than where you bought. When you want to close a long position, you have to sell what you bought. If you’re buying multiple price levels, you’re adding to longs and getting longer.
Getting short
A short position, or a short refers to a market position in which you sold a security that you never owned. In the currency day trading stock market, selling a stock short requires borrowing the stock (and paying a fee to the lending brokerage) so you can sell it. In forex markets, it means you’ve sold a currency pair, meaning you’ve sold the base currency and bought the counter currency. So you’re still making an exchange just in the opposite order and according to currency-pair quoting terms. When you’ve sold a currency pair, it’s called going short or getting short and it means you’re looking for the pairs price to move lower so you can buy it back at a profit. If you sell at various price levels, you’re adding to shorts and getting shorter.
In other currency day trading markets, short selling either comes with restrictions or is considered too risky for most individual traders. In currency trading, going short is common as going long. “Selling high and buying low” is a standard currency trading strategy.
Remember that currency pair rates reflect relative values between two currencies and not an absolute price of a single stock or commodity. Because currencies can fall or rise relative to each other, both in medium and long-term trends and minute to minute fluctuations, currency pair prices are as likely to be going down at any moment as they are up. To take advantage of such moves, forex traders routinely use short positions to exploit falling currency prices. Traders from other currency day trading markets may feel uncomfortable with short selling, it’s just something you have to spin your head around.
Last but not the least, another term used in Forex market is squaring up. If you have no position in the market its called being square or flat. If you have an open position and you want to close it, its called squaring up. If you’re short, you need to buy to square up. If you’re long, you need to sell to go flat. The only time you have no market exposure or financial risk is when you’re square.
If you are looking for a quick way to make high return on investment, forex is not it. Consider other investment strategies from the wealthy if you are new to forex and unsure if you can handle the risk. Leave currency day trading and seek another more profitable investment strategy
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- Currency Day Trading: Understanding Currency Pairs
- The Quick and Easy Guide for the Forex currency trading beginner
- Currency Day Trading Lesson Three- Understanding Loss and Profit
- The Five Minute Guide to "What is Currency Trading?"
