What Does Long And Short Mean Trading?

Perhaps, every novice trader asked himself the question ‘’What are long-term and short-term trades?’’. This is one of the common questions beginners ask when starting out in the forex market.  

In this article, we will explore what these two terms mean and why they are essential in the world of trading. So if you’re new to forex trading, or simply need a refresher on the basics, then keep reading. 

What are long trades?

When a trader buys some type of asset and plans to sell it later for more money, we call that being ‘’long’’. When you have a long trade, it means you have already bought the asset and are waiting for the price to go up so you can sell it. Very often, traders use the terms ‘’buy’’ and ‘’long’’ correspondingly.

Some trading software has a button marked ‘’buy’’, while others have buttons marked ‘’long’’. This just means that you have bought something and are waiting for the price to go up so you can sell it. The term often describes an open position. Saying ‘’I am long currency’’ means that you own your currency and want to sell it later for more money.

The buying processes can be carried out by brokers that make trades automatically. Discover topfx no deposit bonus to be aware of safe brokers in the Forex market.

What are short trades?

When you short an asset, you are selling it before buying it. This is usually done in the hope that the price will go down so that you can sell it to someone else for a profit. Keep in mind that your potential profits are limited to the amount you paid, but your risk increases because the price could keep going up.

One more nuance is that when you short an asset, you are borrowing it from your broker which means that you will have to pay back the amount you borrowed plus interest. Make sure you know how much interest you will be charged before you enter a short position.

When do you need to use long and short trades?

When you think that an asset (like a stock or currency, for example) is going to go up in price, you can ‘’go long’’. This means that you will buy the asset today and hold it until the price goes up.

If you think the price is going to go down, you ‘’go short’’ by selling the asset today and buying it back at a lower price later. Your broker must borrow the assets from another broker or lend them to you if they own them. If the brokerage company can’t borrow it for you, you’re not going to be able to short the asset.

Conclusion

The article introduced you to one of the core concepts in the forex markets. The information about long and short trades can provide a foundation for understanding more complex trading strategies. 

Don’t forget that every basic knowledge needs to be tested in practice. Only by trying and experimenting will you understand what is more convenient for you. 

Wishing you a great week!