An investor’s position in financial market trading is expressed in specific terminology. Versing oneself in these terms, especially when a complete novice, will facilitate the trading experience.
Forex Market Position Terminology
A long position, also known as long, indicates a trader having bought a currency pair. A purchase of a currency pair in the forex market means the base currency has been purchased while the counter currency has been sold. This is vastly different from the stock market.
In a long position, the trader is hoping the prices will increase so the currency pair can be resold for a higher price that what it was originally purchased. To close a long position, what was bought must be sold. If a trader is buying at multiple price levels, it is called “adding to longs or getting longer.”
A short position, also known as short, indicates a trader selling a currency he never owned. It means the trader has sold a currency pair. The base currency has been sold while the counter currency is purchased. An exchange is made but in the opposite order. This is very different from a short position in the stock market. There, selling a stock short involves borrowing the stock from a lending broker at the expense of paying a fee to do so.
Selling a currency pair is also called “going short or getting short.” A trader in this position is aiming for the pair’s price to go lower so it can be bought back for a profit. Going short is as commonplace as going long in the forex market.
This term is used for traders who have no position in the market. Squaring up is also known as being “square or flat.”