"Perhaps the most effective positions"
To understand different types of forex position, it is very important to know the basic concept of forex. Forex or foreign exchange is a trading activity of purchasing and selling of different currencies. In order to make profits, a trader should keep his eyes on the changes of the exchange rates. Forex market is the largest financial market in the world where the trading activity happens.
What does forex position mean? It is a way of doing forex trading in which trades are bought and held for a period of time. There are 4 types of positions- open position, close position, long position and short position. Different traders choose different positions of trading. You should the type of trading which suits your personality.
Forex position trading is a flexible technique of doing the trading activity. Many part-time traders can involve in this type of trading easily even doing full-time jobs. A lot of traders use this technique because it has many benefits.
For instance, a trader purchases one mini lot of EURO/USD 1. 5332. The stop loss order is set on 1. 5312. 20 pips are the risk. If the price goes up to 20 pips, a trader buys another mini lot with 20 pips stop loss order. Now there are 2 positions which only risk 20 pips.
4 Types of Forex Position:
Let’s take a look at these 4 types of forex position. It is extremely important for the traders to gain some knowledge of these positions before starting the trading activity. How can you begin trading without knowing the styles of trading? That’s not possible.
- Open Position:
Open position means the position of a trade which remains open till another opposing trade takes the place of this trade. Open position can follow any other position.
- Close Position:
Close position is the exactly opposite of open position. Day foreign exchange traders generally close the positions on the same day. This is called close position. To close a long position, a trader needs to sell the equal amount of currency pair value to make his long position to zero.
For example, if a trader is trading a long position of 200,000 EURO/USD, he has to sell the same amount in the market to reduce the position into zero.
- Long Position:
When a long position trader buys a currency, he expects the value of the currency will rise. In long position, the trader does not have an intention of selling the currency in near future. If a trader holds his open position for many days, it is considered long position.
- Short Position:
Short position trading means that a trader expects the price will decrease. Short selling is a good way to make profits. Even though short position does not work well in stock markets, it is a very good trading technique in forex markets.
I wrote about 4 different types of forex position in this article in an easy manner. But you may not understand some points if you are a beginner. So, feel free to ask any question in the comments section if required.