What is ‘long’ in forex ?
In the context of forex trading, being ‘long’ refers to a buying position, where a trader expects the value of a currency pair to rise. When a trader goes long, they purchase the base currency and sell the quote currency.
If the value of the base currency increases relative to the quote currency, the trader can sell the position at a higher price to make a profit. Going long is a common strategy in forex trading when there is a belief that a currency will appreciate in value.
Example of ‘long’ in forex
Let’s say a trader believes that the value of the EUR/USD currency pair will increase. They decide to go long by buying 10,000 Euros with U.S. Dollars. At the time of the trade, the exchange rate is 1.1500, meaning they need to spend $11,500 to purchase the Euros.
If the exchange rate later rises to 1.2000, the trader can sell their Euros for $12,000. By closing their long position, they’ve made a profit of $500 ($12,000 – $11,500). However, if the exchange rate had fallen to 1.1000, they would have made a loss of $500 ($11,000 – $11,500).