Short And Long Position

In the market of currency pairs, there are two directions by which a trader can open a position – to reduce the currency pair quotes or its increase. The long position – is the position in which the trader hopes to profit on the fall of the quote. Therefore, the short position – is the one in which the trader sold the currency at a certain price and is waiting for its purchase at a lower price.

Example Of A Long Position:

For example, now the fibre quote is 1.0475 and the trader decides that it will rise right now. Then he comes to the market at this price and exposes the take-profit and stop-loss in a certain amount of points. Next he sits and watches the charts. Once the schedule reaches one of the values, the warrant will go back to the trader (unless you manually close it). But with or without profit the trader will return – already a matter of his analytical abilities and experience of trading in the currency market.

The trader’s profit in this case will be the delivered amount multiplied by the difference in quote, minus the spread that the broker takes for opening a position on the stock exchange.

It turns out that if the trader set 0.1 lot on the warrant, which is 10 000 dollars, and put a take-profit on the 1.0480, where his profit will be 5 points and the offer was closed at this mark, in total, the player earned 5-1 (commission of the broker for opening the warrant) = 4 points. But since he was trading on 0.1 lot, he earned 0.1*0.004*10,000$ = 4$. Yes, this amount is not so large, but few trade on such a short interval. Such a system would only suit those who chose the scalping strategy.

In this light of events, until the trader sold the warrant it is said that the trader is now «in a long position» or, as it is customary to say on slang «in longs». Such traders making profits are called «bulls», or playing up. By the way, until now no one knows why these animals were called similar traders.

Now we will pass to our other market participants – «bears». They also play in the forex currency market, but a bit to the other side. Someone who earns from lowering the quote of a currency couple until it is sold and is «sitting in short positions», or on slang «sitting in shorts». How exactly this is done, now we will show.

Example:

Let’s say the trader opens a warrant to lower the price. It is open at the same price of 1.0475, but quite the other way – downward. Let’s say he uses the same broker as the «bull». Trader puts take-profit of 0.1 lot (10 000$) to decrease the price to 1.0450. As a result, as long as the end point of the chart goes and does not touch any of the values, we can say that this player is now «sitting in a short position».

Now we will calculate his profit when touching the point with the take-profit: He won 25 points. Given that his bet was equal to the «bull» rate, you can simply calculate the proportion of 4/4 * 24 (deducted the broker’s commission) = 24$ – the trader’s winnings from this transaction.