Forex Position Trading

Share This Post!
Deciding to venture into Forex trading is a big decision. Understanding the main principles of forex trading and the trading philosophy ensures the profit, which you as an investor or trader is looking for
Incorporating the concept of forex position trading in a day trading environment can result in huge profit from the forex transactions.

In Forex position trading, a long position is a situation in which one purchases a currency pair at a certain price and hopes to sell it later at a higher price. In this case, the trader profits from an increase in price.

This is also referred to as "buy low, sell high". On the other hand, in Forex position trading, if a trader thinks a currency pair will fall, he will sell it with a hope to buy it back later at a lower price. This is known as a short position, which is the opposite of a long position.

In forex position trading, a trader has a long position on one currency of the pair and a short position on the other currency. So, while forex position trading, a trader defines his or her position as an expression of the first currency of the traded pair, which is known as the base currency.

The second currency is known as the counter currency. In forex position trading, the trader takes a long position on a pair when he or she buys the base currency. If the trader sells the base currency, he/she shorts the pair.

For example, if the current rate for the USD/JPY pair in forex position trading is 120.93, which means it takes 120.93 Yen to exchange for 1 Dollar and if the trader buys the Dollar while selling Yen, he is buying or longing the USD/JPY pair.

When the value of the base currency, here the Dollar, is rising, the rate will be moving upwards. If the rate changes from 120.93 to 121.50, it will take more Yen to buy the same amount of Dollars.

If the trader was to sell the Dollar and buy Yen then he or she would be shorting the pair. By taking a long position on the pair in forex position trading, the trader will wish to sell the Dollar back versus the Yen at the higher price.

In forex position trading, when you enter a trade you either sell the currency pair, or buy the currency pair. When you exit you do exactly the opposite. So when entering forex position trading you may short the pair, which means you sell it in hope that it will go down, so you can buy it back at a lower price and make money on it.

In order to get out of the forex position trading you must buy back the pair that you sold. The same goes for going long on the pair. So effectively it is the position of the currency pairs, which govern the amount of profit you are going to generate in forex position trading.

Related Articles

Should You Use Stock Forecasing Software? | Forex Trading Reviews
Learn what Stock Forecasting software is and whether or not it is for you.
Methodology for Selecting Stock and Bond Investing
There are some parallels between Stock Investing and Bond Investing.
Beginners Guide to Trading on the Markets
Find Out More about Trading and the Stock Market - How Does This Work?
Find Relilable Stock Quotes
Accurate stock quotes are extremely important in binary options trading.
With Financial Trading, Education is the Key to Success
How to increase your success by employing the educational features of a financial trading site.
Developing Your Own Trading Strategy
Don`t always listen to your broker! Develope your own strategies.

"Forex Position Trading" User Comments

No comments posted yet.
What are your comments on this article?