Long and short describe your directional bias in a trade. A long position means you own the base currency and profit if it rises against the quote currency. A short position means you have sold the base currency and profit if it falls. Every forex trade is one or the other. There is no neutral position once you are in the market.
- Long position
- You buy the base currency, betting it will strengthen relative to the quote currency.
- Short position
- You sell the base currency, betting it will weaken relative to the quote currency.
- Entry and exit
- You enter long by buying, exit by selling. You enter short by selling, exit by buying back.
Long position: you own the base, profit if it rises.
Short position: you sold the base, profit if it falls.
Long and short are not moral judgments. A short position is not a bet against a country, it is a directional trade. Many new traders feel uncomfortable shorting and miss half the market. The real risk is not the direction you choose, but the size and the stop loss you place, regardless of which side you are on.
Every trade the desk initiates begins with this choice: are we long or short, and why.