Open And Close Position

The main goal of the Forex market is gaining profit from your position through buying and selling different currencies. For example, you have bought a currency, and this particular currency rises in value. In this case you gain profit if you quickly close your position. If you close your position and sell the currency back for fixing your profit, you are in fact buying the counter currency in this pair. That's how a rate of worth has been discovered - it's one currency value compared to another while operating with currency pairs. In the end, currency of any country has value only compared to another country's currency.

The "position" is the netted sum commitment in a particular currency. The position can be flat or square, long or short. We call the position square when there's no exposure, it's long if more currency is being bought than sold, and the position is short if more currency is being sold than bought.
The goal of currency trading is exchanging one currency for another. The broker usually expects the market rate or price to change in such a way that the currency he has bought rose in value compared to the one he has sold. Currencies are always defined in pairs in the Forex market; and consequently, synchronous buying of one currency and the selling of another follow all trades operations. If you have bought a currency and the value of its price increases, the broker should sell the currency back if he wants to fix the profit at this level. What's "an open trade or position"? It occurs when a trader has bought or sold one currency pair and has not sold or bought back the same sum to close the position.

There's an expression - "going long" or "longing the market". What does it mean? It's when you want to purchase the base currency, and are also supposed to purchase the currency pair as well. Going long the EUR/USD pair means purchasing the base currency and selling the same sum in the quote currency. You should own the quote currency before selling. It is sold quickly in the open market and used to protect your long position on the base currency.

There's also the so-called "shorting the market". The same rules are used here as explained above only vice versa. If you see that the base currency value is getting lower than particular currency or the secondary currency is exceeding the base currency, you should not buy the currency pair but, on the contrary, sell it. Going short the EUR/USD pair means selling the base currency and buying the same sum of the quote currency at the running exchange rate.

[ForexGen Demo Accounts Contest]

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