Long and Short Positions in Forex
Going long and short in forex is inevitable because long and short positions are essential for trading. There are both strategic approaches that are necessary to survive the ups and downs in the market. Forex trading is known to be very technical to handle such a business. This technicality is the reason one should know both long and short positions and the time to take them. Hence, it is essential to know the difference between long positions and short positions.
What is a long position?
Having a long position in forex implies that the person is the owner of the security. Long positions make investors maintain their high expectations that there would be a rise in the value of stock in the coming days.
What is a short position?
Occupying a short position implies that the person sells a stock that belongs to another person. Investors will sell short when they believe that the price of the stock will reduce in value. Hence, when there is a fall in price, short trading becomes the better option. The investor can choose to buy the stock at a decreased price and earn some profits.
How long can you hold a forex position?
Since holding a long position in trading means ownership, it is only a positive condition when there is a rise in value. A decrease in value is not a good business condition for such investors. However, when there is a rise in value, an investor needs to stop buy order. Nevertheless, a long position in the forex is not different. An investor can only expect what would bring about more profits. So, an investor with ownership of forex securities will only expect an increase in value.
Foreign Currency Trading Position
Long position and short position in forex can be simultaneously or separately. This is a function of the value of stocks in the market. For example, as an owner, it is safer only to sell when the value of the stock is high. However, when this is not the case, what can an owner do? Such an owner should exercise patience and take a short position. Taking a short position means the owner of the investment, which has dropped in value, will act like he has no investment. Instead, the investor will buy more stocks when the value has dropped such that, when there is eventually an increment, he has sufficient stock to sell.
Since forex trading is practiced almost over the world, there is a need for the use of foreign currency. Foreign currency trading position in itself is the transaction of currency for another currency. This means that the Euro can be swapped and replaced with the U.S. dollar. More so, there is a market needed for foreign exchange. This market is known as the Forex Market. The forex market is huge and arguably the most liquid one. It does not work with a centralized location but an electronic platform. The electronic platform is the market and hence, explains all the activities of forex trading.
