Currency Trading Long and Short Positions

Among the most used Foreign currency definitions for currency trading are long and short positions.

A long position is made when the trader buys a currency. The long position is made by the investor if he expects the currency to later rise in value. If that happens, he will be able to sell the currency he bought for a higher price than what he paid for it. In this case, the trader can benefit from a market that is on the rise.

An example for a long position is given for USD/JPY currency quote worth 114.34 / 38. The long position will be done for 114.38, meaning the ask price.

A currency trading short position is maintained when a trader sells a currency in the expectation that it will depreciate in value. Contrary to common sense, for this trade the investor wants the currency to drop, and only then will he make a profit.

In order to decide which position to enter, you need to get familiar with technical analysis and get to know the different indicators of the market direction.

Using the right forex trading strategy, you'll be able to place the right position, either long or short, and benefit from the increase in the direction you expected.

Posted by Richard Hollar