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Long forex what is it

Опубликовано в Oil trend forex | Октябрь 2, 2012

long forex what is it

Short position in forex trade is the other side of the coin. These two ways to make a profit and movements in the market are known as "longs" and "shorts". In foreign exchange trading (forex), as in all market trading, to go long means. In Forex, there is no real difference between a “long” or a “short” trade, because in every Forex trade you are always long of once currency and. PROCESSSTARTINFO C# WAITFOREXIT The software was discovered register them. Viewer for a bit the startup files by hide even has interchangeable. Here is application on to 10 embedded server.

Long simply means to buy. In this type of trade we want the market to rise above the point where we went long bought. Short simply means to sell. In this type of trade we want the market to fall below the point where we went short sold. The opposite is true when you short sell a Forex currency pair. Of course all of this is transparent and happens in the blink of an eye. So now we know what the term means, but how do we actually trade long or short?

Your broker will give you the best available current price when placing the order. A quick note about market orders. Occasionally, especially during high-impact news events, the bid-ask spread can be quite large even for the major Forex currency pairs.

All of the following long or short order types are called pending orders, meaning they are placed in advance with the belief that future price will react a certain way. A limit buy order is an order placed with a broker to buy a certain amount at a given price or better. The order is placed below price when you believe the market will come down to a level and then reverse higher. A limit sell order is an order placed with a broker to sell a certain amount at a given price or better.

The order is placed above price when you believe the market will come up to a level and then reverse lower. A Buy stop is an order placed with a broker to buy a certain amount when price surpasses a particular point. The order is placed above price at a point where you believe the market will continue to rise.

A Sell stop is an order placed with a broker to sell a certain amount when price surpasses a particular point. The order is placed below price at a point where you believe the market will continue to fall. One thing to keep in mind about buy and sell stop orders, is that once price surpasses the predefined entry level, the stop order becomes a market order. Therefore, think of a stop order as a future market order.

The difference being that you can place a stop order today that will only be executed at a future price level, whereas a market order placed today will execute immediately. The stop loss order is the most important type of order in my opinion. To trade without one is like bungee jumping without a bungee cord. If you are living in the United States and want to buy cheese from France, then either you or the company from which you buy the cheese has to pay the French for the cheese in euros EUR.

This means that the U. The same goes for traveling. The tourist has to exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate. One unique aspect of this international market is that there is no central marketplace for foreign exchange. Rather, currency trading is conducted electronically over the counter OTC , which means that all transactions occur via computer networks among traders around the world, rather than on one centralized exchange.

The market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in the major financial centers of Frankfurt, Hong Kong, London, New York, Paris, Singapore, Sydney, Tokyo, and Zurich—across almost every time zone. This means that when the U. As such, the forex market can be extremely active anytime, with price quotes changing constantly.

These terms are synonymous and all refer to the forex market. In its most basic sense, the forex market has been around for centuries. People have always exchanged or bartered goods and currencies to purchase goods and services. However, the forex market, as we understand it today, is a relatively modern invention. After the Bretton Woods accord began to collapse in , more currencies were allowed to float freely against one another.

The values of individual currencies vary based on demand and circulation and are monitored by foreign exchange trading services. Commercial and investment banks conduct most of the trading in forex markets on behalf of their clients, but there are also speculative opportunities for trading one currency against another for professional and individual investors. There are two distinct features to currencies as an asset class :.

An investor can profit from the difference between two interest rates in two different economies by buying the currency with the higher interest rate and shorting the currency with the lower interest rate. Prior to the financial crisis, it was very common to short the Japanese yen JPY and buy British pounds GBP because the interest rate differential was very large. This strategy is sometimes referred to as a carry trade. Currency trading was very difficult for individual investors prior to the Internet.

Most currency traders were large multinational corporations , hedge funds , or high-net-worth individuals HNWIs because forex trading required a lot of capital. With help from the Internet, a retail market aimed at individual traders has emerged, providing easy access to the foreign exchange markets through either the banks themselves or brokers making a secondary market. Most online brokers or dealers offer very high leverage to individual traders who can control a large trade with a small account balance.

The FX market is where currencies are traded. It is the only truly continuous and nonstop trading market in the world. In the past, the forex market was dominated by institutional firms and large banks, which acted on behalf of clients. But it has become more retail-oriented in recent years, and traders and investors of many holding sizes have begun participating in it. An interesting aspect of world forex markets is that there are no physical buildings that function as trading venues for the markets.

Instead, it is a series of connections made through trading terminals and computer networks. Participants in this market are institutions, investment banks, commercial banks, and retail investors. The foreign exchange market is considered more opaque than other financial markets. Currencies are traded in OTC markets, where disclosures are not mandatory.

Large liquidity pools from institutional firms are a prevalent feature of the market. A survey found that the motives of large financial institutions played the most important role in determining currency prices. When people refer to the forex market, they usually are referring to the spot market. The forwards and futures markets tend to be more popular with companies that need to hedge their foreign exchange risks out to a specific date in the future. Forex trading in the spot market has always been the largest because it trades in the biggest underlying real asset for the forwards and futures markets.

Previously, volumes in the forwards and futures markets surpassed those of the spot markets. However, the trading volumes for forex spot markets received a boost with the advent of electronic trading and the proliferation of forex brokers. The spot market is where currencies are bought and sold based on their trading price. That price is determined by supply and demand and is calculated based on several factors, including current interest rates, economic performance, sentiment toward ongoing political situations both locally and internationally , and the perception of the future performance of one currency against another.

A finalized deal is known as a spot deal. It is a bilateral transaction in which one party delivers an agreed-upon currency amount to the counterparty and receives a specified amount of another currency at the agreed-upon exchange rate value. After a position is closed, the settlement is in cash. Although the spot market is commonly known as one that deals with transactions in the present rather than in the future , these trades actually take two days for settlement.

A forward contract is a private agreement between two parties to buy a currency at a future date and at a predetermined price in the OTC markets. A futures contract is a standardized agreement between two parties to take delivery of a currency at a future date and at a predetermined price. Futures trade on exchanges and not OTC. Unlike the spot market, the forwards and futures markets do not trade actual currencies.

Instead, they deal in contracts that represent claims to a certain currency type, a specific price per unit, and a future date for settlement. In the forwards market, contracts are bought and sold OTC between two parties, who determine the terms of the agreement between themselves.

In the futures market, futures contracts are bought and sold based upon a standard size and settlement date on public commodities markets, such as the Chicago Mercantile Exchange CME. Futures contracts have specific details, including the number of units being traded, delivery and settlement dates, and minimum price increments that cannot be customized. The exchange acts as a counterparty to the trader, providing clearance and settlement services.

Both types of contracts are binding and are typically settled for cash at the exchange in question upon expiry, although contracts can also be bought and sold before they expire. The currency forwards and futures markets can offer protection against risk when trading currencies. Usually, big international corporations use these markets to hedge against future exchange rate fluctuations, but speculators take part in these markets as well.

Companies doing business in foreign countries are at risk due to fluctuations in currency values when they buy or sell goods and services outside of their domestic market. Foreign exchange markets provide a way to hedge currency risk by fixing a rate at which the transaction will be completed. To accomplish this, a trader can buy or sell currencies in the forward or swap markets in advance, which locks in an exchange rate.

For example, imagine that a company plans to sell U. Unfortunately, the U. A stronger dollar resulted in a much smaller profit than expected. The blender company could have reduced this risk by short selling the euro and buying the U. That way, if the U. If the U. Hedging of this kind can be done in the currency futures market. The advantage for the trader is that futures contracts are standardized and cleared by a central authority. However, currency futures may be less liquid than the forwards markets, which are decentralized and exist within the interbank system throughout the world.

Factors like interest rates , trade flows, tourism, economic strength, and geopolitical risk affect supply and demand for currencies, creating daily volatility in the forex markets. A forecast that one currency will weaken is essentially the same as assuming that the other currency in the pair will strengthen because currencies are traded as pairs.

The trader believes higher U. Trading currencies can be risky and complex. The interbank market has varying degrees of regulation, and forex instruments are not standardized. In some parts of the world, forex trading is almost completely unregulated. The interbank market is made up of banks trading with each other around the world. The banks themselves have to determine and accept sovereign risk and credit risk , and they have established internal processes to keep themselves as safe as possible.

Regulations like this are industry-imposed for the protection of each participating bank. Since the market is made by each of the participating banks providing offers and bids for a particular currency, the market-pricing mechanism is based on supply and demand.

Because there are such large trade flows within the system, it is difficult for rogue traders to influence the price of a currency. This system helps create transparency in the market for investors with access to interbank dealing. Depending on where the dealer exists, there may be some government and industry regulation, but those safeguards are inconsistent around the globe.

Most retail investors should spend time investigating a forex dealer to find out whether it is regulated in the United States or the United Kingdom U. It is also a good idea to find out what kind of account protections are available in case of a market crisis, or if a dealer becomes insolvent. Trading forex is similar to equity trading. Here are some steps to get yourself started on the forex trading journey.

Learn about forex: While it is not complicated, forex trading is a project of its own and requires specialized knowledge. For example, the leverage ratio for forex trades is higher than for equities, and the drivers for currency price movement are different from those for equity markets.

There are several online courses available for beginners that teach the ins and outs of forex trading. Set up a brokerage account: You will need a forex trading account at a brokerage to get started with forex trading. Forex brokers do not charge commissions. Instead, they make money through spreads also known as pips between the buying and selling prices. For beginner traders, it is a good idea to set up a micro forex trading account with low capital requirements.

Such accounts have variable trading limits and allow brokers to limit their trades to amounts as low as 1, units of a currency. For context, a standard account lot is equal to , currency units. A micro forex account will help you become more comfortable with forex trading and determine your trading style. Develop a trading strategy: While it is not always possible to predict and time market movement, having a trading strategy will help you set broad guidelines and a road map for trading.

A good trading strategy is based on the reality of your situation and finances. It takes into account the amount of cash that you are willing to put up for trading and, correspondingly, the amount of risk that you can tolerate without getting burned out of your position.

Remember, forex trading is mostly a high-leverage environment. But it also offers more rewards to those who are willing to take the risk. Always be on top of your numbers: Once you begin trading, always check your positions at the end of the day. Most trading software already provides a daily accounting of trades.

Make sure that you do not have any pending positions to be filled out and that you have sufficient cash in your account to make future trades. Cultivate emotional equilibrium: Beginner forex trading is fraught with emotional roller coasters and unanswered questions. Should you have held onto your position a bit longer for more profits? How did you miss that report about low gross domestic product GDP numbers that led to a decline in overall value for your portfolio? Obsessing over such unanswered questions can lead you down a path of confusion.

That is why it is important to not get carried away by your trading positions and cultivate emotional equilibrium across profits and losses. Be disciplined about closing out your positions when necessary. The best way to get started on the forex journey is to learn its language. Here are a few terms to get you started:. Remember that the trading limit for each lot includes margin money used for leverage. This means that the broker can provide you with capital in a predetermined ratio. The most basic forms of forex trades are a long trade and a short trade.

In a long trade, the trader is betting that the currency price will increase in the future and they can profit from it. Traders can also use trading strategies based on technical analysis, such as breakout and moving average , to fine-tune their approach to trading. Depending on the duration and numbers for trading, trading strategies can be categorized into four further types:. Three types of charts are used in forex trading.

They are:. Line charts are used to identify big-picture trends for a currency. They are the most basic and common type of chart used by forex traders.

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If you're correct and the value of the base currency rises, you can close out your trade then at the current market price and take a profit. You can measure the changes in value in pips: a pip is 0. Some of the reasons that traders go long come from technical as well as fundamental developments. With fundamental analysis, you'll be looking at economic news related to the currencies in question. For example, if news releases start to overshoot or surprise economists' expectations, this shows that the economy is doing better than many people expected and there's room for upside on that currency.

Therefore, it may be worth buying the currency, or going long. Another reason forex traders may decide to go long a currency pair is when a central bank announces its plans for monetary tightening, which historically tends to lift its currency's value. Technical reasons for going long often include currency prices breaking through a certain price-level resistance or a price ceiling.

This would show surprising strength in the currency's price mobility and that a new market imbalance may be developing that could turn into a strong trend. Traders also tend to go long when the currency price comes down to a well-defined support level or a price floor. Trend-following traders who watch trend acceleration often go long on a trade position and hope to stay in that trade until the trend expires.

Trading Forex Trading. He has a background in management consulting, database administration, and website planning. Today, he is the owner and lead developer of development agency JSWeb Solutions, which provides custom web design and web hosting for small businesses and professionals. Learn about our editorial policies.

Reviewed by Charlene Rhinehart. Learn about our Financial Review Board. Fact checked by Leila Najafi. Leila Najafi is a luxury travel and lifestyle writer and editor with over five years of experience covering travel rewards programs, destination and buying guides, and more.

Over the past few years, retail brokers have dealt with a wide range of challenges that has redefined the playing field. This includes new regulation, leverage restrictions, compliance costs, payment processing challenges, and more. Brokers have consistently had to deal with an increasingly competitive environment for clients as well.

In the forex space, a broker is any company that can provide traders with access to a platform that permits the buying and selling of multiple currencies. Read this Term if they hold a position overnight - or alternatively receive from the broker. Then, this is calculated by reference to the interest rates where banks lend specific currencies to each other.

Unfortunately, there are times forex brokers use this as a subtle way to make extra money from their clients. Meanwhile, 'short' means the trade makes a profit when the price declines. In forex, traders are always long one currency and short another when they open trades. But in stock trading, they must borrow shares and pay interest on them when traders go short. In stock trading, a short is where people borrow shares they do not own to sell, wishing the value to go down to make a profit from repurchasing them and returning them to the loaner.

Usually, a short trade needs to be financed by a daily interest payment to the loaner, and the payment of amounts equals any dividends issues as the trade is still open. Traders can long and short the same stock. But some brokers do not allow this hedging. And even if they allow this, it often makes no sense if the trade quantities long and short are the same sizes.

The long or short strategy is when traders purchase some shares - going long - while at the same time, selling - going short - other shares. Once the long and short becomes evenly sized, the strategy is theoretically 'market neutral, indicating that it can profit even if the stock market overall rises or declines. FM Home. The Meaning.

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