Most Important Terms In Forex – Going Long – Going Short

One may be easily confused with most important trading terminology associated with forex trading specially one is a newbie. There are a few basic terms a beginner must be aware of before venturing into world of forex market. 

What is Long Position?

When a currency pair is long it indicates the first currency is bought while the second one is sold or short.  In other words a long position means one has decided to buy the first currency in a particular pair of currency under the assumption that the price of the same is going to increase letting one make a profit when one closes his position. So, going long means buying the first currency in a pair. 

In forex market currencies are always traded in pair e.g. USD/EUR. The first one in the pair is called ‘base currency‘ while the second is called the quote or ‘cross currency‘. 

Therefore, when it is said a trader is going long on the USD/EUR pair, it indicates that the trader is buying USD (as in this case) the base currency rather than EUR which is cross currency (as in this case). Going long in a specific pair always refers to the position taken specifically to the ‘base currency’.

Going Short
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As you can think ‘going short’ is just the opposite of ‘going long’. This means a short position indicates when the first currency in a pair is sold and the second one is bought. When a trader goes short on a currency it emphasizes that the trader expects a decline in its market price. 

A position either long or short is always expressed in terms of the base currency. In forex trading a trader is always required to go long in one position while simultaneously going short in another or vice versa.