Going Long or Short

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Re: Going Long or Short

Post  vietnamvodoi on Sat Oct 16, 2010 3:20 pm

So how does the actual trading work? A complete transaction is the buying of one currency and selling of another at the same time. We will be focusing on spot transactions in these lessons and other forms of Forex transaction (i.e. futures, options) will not be covered. The technical definition for a spot contract is a transaction at the current market rate with a settlement that takes place within two business days. However, in a practical sense, when trading Forex, a position is opened at the current rate and can then be closed any time afterwards, at that next moment's rate. Positions that are not closed within the two business days are automatically "rolled over", meaning the Forex dealer with which the position is open will keep automatically renewing your spot contract for you until it is closed.

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Going Long or Short

Post  akaishuu on Fri Oct 15, 2010 3:34 pm

Going Long or Short

A long position is a situation in which one purchases a currency pair at a certain price and hopes to sell it later at a higher price. This is also referred to as the notion of "buy low, sell high" in other trading markets. In Forex, when one currency in a pair is rising in value, the other currency is declining, and vice versa. If a trader thinks a currency pair will fall he will sell it and hope to buy it back later at a lower price. This is considered a short position, which is the opposite of a long position.

On every exchange, a trader has a long position on one currency of the pair and a short position on the other currency. A trader defines his or her position as an expression of the first currency of the traded pair. The first currency in a pair is known as the base currency. The second currency in the pair is called the counter currency. When a trader buys the base currency he or she takes a long position on a pair, if a trader sells the base currency he or she shorts the pair. Let’s look at a Forex chart and visualize this idea.
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