Going long and going short
Every trade points in one of two directions. Going long means you buy, expecting the price to rise; going short means you sell, expecting it to fall. Knowing which direction a position takes, and how profit and loss follow from it, is one of the first things worth getting clear.
Going long: buying to profit from a rise
When you , you buy an instrument because you expect its price to increase. If the price later rises above what you paid, the position shows a profit; if it falls below, it shows a loss. Going long is the direction most people picture when they first think about buying and selling.
Going short: selling to profit from a fall
is the mirror image. You sell first, expecting the price to decline, with the aim of buying back later at a lower level. If the price falls, the position gains; if it rises instead, it loses. Shorting means a downward move is something a trader can respond to, not just an upward one.
Profit and loss in each direction
Suppose, as an illustration, EUR/USD is quoted at 1.1000. A long position profits if the price moves up toward 1.1050 and loses if it drifts down to 1.0950. A short position opened at the same level does the opposite: it profits near 1.0950 and loses near 1.1050. The size of the move, not the direction you chose, sets how large the result is.
Knowledge check
Check your understanding. You can retry as many times as you like, and only concepts are tested.
Question 1 of 3
What does it mean to go long on a currency pair?
Risk warning
Trading forex and CFDs on margin carries a high level of risk and can result in the loss of all your capital. These lessons are educational and general in nature; they are not investment advice or a personal recommendation. Consider your objectives and experience, and seek independent advice if needed.
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