WHAT IS LONG IN THE FOREX
When it comes to the foreign exchange market, one should be familiar with the term "going long" in the forex or in other words, one can say" taking a long position".
Basically,
when being using in trade, long refers to position that makes a profit if a currency pair's market price increases.
UNDERSTANDING: GOING LONG IN FOREX
When a trader trade in foreign exchange market, since they buy or sell in the currency pairs, "going long" means that you are buying the base currency and selling the quote currency .
Therefore,
Taking example, if you go long EUR/USD , you are buying Euros and selling US dollars.
Apparently,
Going long is the opposition of going short or shorting, which means taking a position that makes a profit if a currency pair's market price Falls. Derivatives allow traders to take a long position on a market without actually buying the underlying currency pair.
SPECIAL CONSIDERATION: GOING LONG IN FOREX
To trade foreign currency, you buy or sell a currency pair. All currency pairs have a base currency and a quote currency. The pair usually looks something like, USD/JPY =100.00. Here, the USD or, US dollar, is the base currency and JPY or Japanese yen, is the quote currency. This quote shows a rate of $1 being equal to the ¥100 .
Consequently,
Because every currency trade involves a pair, you will always simultaneously go long on one currency shot on the other when making a trade.
Therefore,
When you are long a currency it means you are betting the base currency will strengthen against the quote currency. In the example above you are betting the dollar will be equal to more than 100 yen in the future.
Hence,
In a long trade on this currency pair, you are buying or going long on the dollar and you will simultaneously go short on the Japanese yen. In effect, you are selling the Yen , just like when you short a stock by selling the shares in stock market.
HOW TO GO LONG IN FOREX TRADING ?
Because you are both buying and selling currencies when you make a Forex trade, you can speculate on the upward and downward movement.
Therefore,
To go long on a certain currency, you open a trade in a buy position because you believe the base currency is bullish ---- likely to raise in value. At the same time it also means you are bearish on the new of the quote currency and it will fall in the future.
Accordingly ,
if you are correct the value of the base currency Rises close out your trade then at the current market price and take a profit.
WINDING UP:
Trend-following traders who watch trend acceleration often go long on a trend position and hope to stay in that trade until the trend expires. Another reason traders may decide to go long a currency is when a central bank announces its plans for monetary tightening, which historically tends to lift its currency's value.
