Trading on forex market, as well as on others financial markets consists in exchanging on thing for the other when the rates are favorable. Simply speaking we buy cheap, sell expensive – and the other way round – we sell expensive in order to buy cheaper. In the forex market it is possible to trade from both directions, the long side i.e. buying and also from the short side i.e. selling.
Let’s take into account EUR/USD currency pair. If we think that the rate of this pair is going to fall we would then ‘sell’ it, so we open what is called a short position. We would have a short EUR/USD position and if the exchange rate goes lower then we would have a profitable position.
If we think that the rate of this pair is going to go up, then we ‘buy’ currency pair EUR/USD. So this time it means that we have a long position in EUR/USD and profit from a rising exchange rate.