Long or Short in Forex Markets

‘Going long’ in the ForEx markets means buying a currency, or a basket of currencies, betting on the possibility that their value may rise in the future, with the aim of making a profit by selling them when their price is higher than the purchase price.

Conversely, ‘going short’ means betting on the downside of a currency or basket of currencies through the mechanism of short selling. This strategy consists of a sale of one or more currencies that the trader does not actually hold but that he borrows from a financial institution, paying them on the basis of their current listing.

This loan obliges the trader to repay the sum within a term set in the contract. During this period, if the currency price falls, the trader is required to purchase the same amount loaned. In this case, paying a lower price and thus realizing a profit characterized by the difference between the sale price and the repurchase price.

If the price goes up, the trader is still “obliged” to buy the underlying again, in order to return it to the institution within the established terms. In this case it does not make a profit but suffers a loss equal to the difference between the sale and repurchase price.

 

Fri, 09/08/2019 – 11:48

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