Long and Short - the essence and characteristics of the market positions
For beginner traders, it is very important to clearly understand the essence of the most basic operations when trading the market, namely long and short positions (or Buy & Sell), because all further work is based on them. So, let's start with the definition of long and short positions.
The easiest way to make money is to buy currency and wait until it starts to rise in value to sell it safely. However, it is not perfect; there is another way to make a profit, which is to make money on the rise or fall in the price of a currency that you have in stock.
Short position (or Sell operation), its essence and peculiarities on
Transaction on the currency market, which involves bringing income from the fall in the exchange rate is so called short position (Sell operation). Quite often it is possible to make money on such a deal. These deals owe their name to the fact that the rate often falls much faster than rises. In other words, the price of a particular currency is bound to fall over a certain, usually short, period of time. Such deals are also called down deals.
At the time when a market participant (trader) sells an underlying trading currency pair, he is considered to have taken a short position. For example, it is possible to open a short position on the euro through such a sale of EUR/USD. At the same time open a long position on the dollar, because dollars are bought in this case. To indicate those positions that are open short, it is customary to use the term "short-term position".
Long position (or operation Buy), its essence and peculiarities on
Long position (Buy operation) - is a deal on the rise, which is used several times more often than the short position on . However, it is also possible to work in the market with the use of down trades. As long as the market is showing a sideways and sluggish trend, according to the tips of professionals, in this case a long position will not be appropriate. The best solution would be to go short and not take too long to close out the position.
As a rule, short positions do not bring super profitsThe price is not very high, and they do not bring much either, so do not tempt fate, and immediately buy (enter into a long position) after the fall in a few points, without waiting for a significant decline.
As already understood, when the trader acquires (or buys) a currency pair when opening a position, it means he has taken a long position. This usually involves the purchase of financial assets, which include securities and currencies. At the same time there is a corresponding sale. However long position does not always imply the acquisition of any assetsIt is also made when the trader closes a previously opened short position.
It is worth noting right away that short positions bring profits to large players (layout-makers)The fact that it is not possible to say about traders with small capital, for whom it is extremely difficult to make money on short positions.
The big players, also known as market bears, use the tactic of mass sales at a low price of a particular currency to create the appearance of a rapid fall in the value of the currency. When the price falls to an acceptable level for them, the layout-makers begin to actively buy it.