Buying and selling Currencies

Since in case of forex trading currencies are always traded in pairs, always two transactions are taking place simultaneously. It so happens that at the same time a currency is bought and sold.

In case of the price of EUR/USD two variants are possible:

  • You buy EUR and at the same time you sell USD
  • You sell EUR and at the same time you buy USD

If for example you expect that the EUR is going to rise compared with the USD, you’re consequently going to buy EUR and you’re going to sell USD.

On the other hand, if you expect that the value of the EUR is going to drop compared with the value of the USD, you’re going to sell EUR and you’re going to buy USD.

Going long and going short

These are forex concepts which you’re frequently going to encounter and they are connected with buying and selling the base currency (the first currency of a pair).

To give an example we’ll return for a little while to the currency pair EUR/USD.

If you are expecting a rise of the EUR in relation to the USD, you’re going to buy EUR (and consequently you’re going to sell USD). Buying the base currency is occasionally also called “going long”. In that case it is said: “I’m going long EUR”.

If on the contrary you’re expecting that the base currency (EUR) is going to drop in relation to the counter currency (USD), you’re going to sell the base currency, which is being called “going short”. In that case it is said: “I’m going short EUR”.

  • Going long = buying base currency, selling counter currency
  • Going short = selling base currency, buying counter currency
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