When you start out as a trader, one of the first blurring aspects you will encounter is to discern the behavior of how currency pairs trade.
Some are new to trading , others have transitioned to the forex platform from stock or options, and as such knowing how forex long short positions work can be a little different.
In long short positions forex trading, you buy and sell in pairs. The first currency in a pair is known as the base currency.
if you are in a forex short position long position "EUR/USD" this means you have bought the Euro (and automatically sold the Dollar). However, if you bought the USD/EUR it means you have BOUGHT the dollar and automatically sold the Euro.
What does short selling mean?
“Short selling” is selling something that you do not own.
Since a forex position short or long is a transaction of duality, 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.
Benefits of short selling?
When you believe that a specific currency will decline, you can benefit by shorting that currency against another.
Selling short allows you to obtain additional gains to your trading account when a currency declines in price.
Economic events or political instability can lead to a decline in the value of a currency, and short-sellers monitor this for fluctuations in the market, hoping to make a profit in the dips, or long-term trend of the currency.
Once you decide which currency you would like to short, there are many ways to execute the position.
In order to decide which position to enter, you need to get familiar with technical analysis, and design a solid trading strategy.
Learn the different indicators of market direction.
Using the right short position forex trading strategy, you'll be able to place the right position, either long or short.
Trade in an uncomplicated way when first starting out. The easier your strategy is, the more progress you will make as trader, especially in the beginning.
One of the main goals of strategy should be to keep your charts uncluttered in the beginning. Of course, charts should have support and resistance areas. I use these support and resistance areas in concurrence with candlestick analysis to trade Forex.
Charts with a multitude of indicators would make it impossible to really learn and determine the best course of action in the beginning.
There are many ways to make money trading and buy learning how forex short positions work, studying how different global economic indicators influence the market, and designing a proper trading strategy, you will have the potential chance to really supplement your trading account with gains that otherwise would never be able available to you.
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The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.