Short and long positions in forex, you must have come across these terms frequently while trading. The forex trading currency market uses these terms to express market positioning. But if you’re relatively new to forex market, then being very clear on the terms helps, as forex currency trading involves simultaneous buying and selling. The prime focus of this page is to help you gather info on short vs long positions in forex. Read on.
Comparison of short and long positions:
A long position, or simply a long in forex trading currency market, refers to a market position in which you’ve bought a currency pair. When you’re in a long position, you are watching the prices to move higher, so that you can sell at a higher price and make a neat profit. Closing a long position means you have to sell what you bought. Buying currencies at multiple price levels means you’re adding to longs and getting longer.
A short position, or simply a short, means you have traded the base currency and bought the counter currency. According to currency-pair quoting terms, you’re still making a trade but just in the opposite order. When you sell a currency pair, it’s called going short or getting short. This means that you’re looking for the price of the currency pair to move lower so that you can buy it back for a profit. Selling at different price levels means that you’re adding to shorts and getting shorter.
Moving on with the short vs long positions in forex, it is a common strategy to sell high and buy low. The currency pair rates echo relative values between two currencies. As the currencies can show minute-to minute fluctuations in relation to each other, whether in medium or long-term trends, prices of currency pair prices are as likely to go down at any moment as they are up. Forex traders take advantage of such price moves and normally use short positions to make use of falling currency prices.
The difference between long and short positions is not important. As long as a trader is selling at a high price or buying at a low price, profit is assured. It doesn't matter really whither the buying or selling comes first.