short/long, page-3

Hey Serpeant, welcome to the FOREX TRADING forum :)

m'kay... is not that simple as short or long the AUD, as in forex we generally talk about currency PAIRS... eg AUD vs USD (AUDUSD).

When we talk about going short or going long, what we mean is either buying a currency pair (going long) or selling a currency pair (going short).

I dont wanna go into what a currency pair actually means in great detail as that would take a lotta words n I am not to sure what your knowledge level is so it is kinda moot. Basically though a currency pair provides you with a ratio of the value of one currency versus the other.. for instance, with the acheivment of "parity" what is being talked about is the AUDUSD currency pair and the fact that the AUD is increasing in value compared to the USD... to the extent that now, if you want to buy one USDollar, it will cost you give or take, one AUstralianDollar to do so.

three months back (gove or take, this is just to explain), it would have cost you roughly $1.20 Aud to purchase one USD... so effectively, in three months, the ratio of AUD to USD has risen... from .9 to 1.0

What we do, via the currency PAIRS is gamble on the decrease or increase of the ratio... so if one was sharp three months ago one would have BOUGHT the AUDUSD pair (buy = going long), and ones position, now, would be somewhat positive, as the Ratio has increased and the value of ones postion would have increased accordingly... to capitalise on this gain one closes ones LONG position (from BUYING the pair). To close the position, one initiates a SELL, IE one sells the position back to whomever one bought it from, but with the higher ration then the closing means one has profited by the increase.

Going SHORT means SELLING the currency pair, expecting the ratio, in this case, to drop from 1.0 to a lower figure... (that is it would cost MORE AUD to buy LESS USD.. or the value of the USD would INCREASE compared to the AUD)if the "value" (ratio) of the currency pair DROPS then the Sell position is good, and one buys it back at a lower ratio number and thus makes a profit there...

Confused? LOL sorry, 'tis more confusing than it needs to be... in simple terms, a currency pair either increases or decreases in value (the ratio of value between the currencies either gets bigger or smaller) depending on what traders "beleive". The purpose of going short is to capitalise on a DECREASE in the ratio, and the purpose of going long is to capitalise on an INCREASE in the ratio.

Hope that helps...

;)