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Forex trading terminology

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Traders in the forex market use many of the same terms to express market positioning as other financial markets, but it is important to understand the terms, and be clear on what it means in respect to the simultaneous buying and selling that occurs in the forex market. The three terms you need to understand, including what the implications are is going long, going short, and squaring up:

1. Going long- There are a variety of strategies for trading in the Forex market, and going long is one such method. When you go long the idea is you are looking for prices to move higher so you can sell for more than you bought for. It is similar to the strategies used in the stock market and other financial markets. Buy now, and wait until the prices go up. The way you close this kind of position is you sell what you have bought. Sometimes you buy at multiple price levels. When you do this, it is referred to as adding to longs, and getting longer.

2. Going short- Going short or taking a short position is another valid trading strategy in the forex market. Selling short refers to a position where you sold a security that you never owned. What this means is you have sold a currency pair, where you sold the base currency and bought the counter currency. You are making an exchange, but in the opposite order. The idea when you sell a currency pair in the short position is that you are looking for the pair's price to move lower, that way you can buy it back at a profit. This is a great strategy for taking advantage of minute-to-minute as well as long term price fluctuations in currency.

3. Squaring up- Squaring up means having no position at all in the market. If you have an open position, and you want to close it, it is called going flat, or squaring up. So, if you are in a short position, you would buy to square up. If you are in a long position, you would sell to square up. Being square is the only time you have no market exposure or financial risk.


In currency trading, going short is just as common as going long. It is a standard trading strategy that many employ. Because currencies both fall and rise relative to one another, this is a great way to take advantage of moves. Many traders in the forex market take advantage of going short in order to exploit falling currency prices. This is important to understand because many traders who are used to investing in other markets struggle with this idea. Howeve,r because currency pair rates are relative to the values between the two currencies, there is no set price. It is not reflecting a single commodity, but two. This is why both going long and going short are valid strategies even though they seem to be the opposite of one another.


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