How do you trade forex?
Forex is traded in ‘lots’, which are often very large, equivalent to 100 000 units of the base currency. You’ll likely want to buy the currency you believe will strengthen and then sell it later for a profit. Alternatively, you’d sell the currency you believe will weaken and then buy it back later at a lower price, thereby making a profit.
Learn more about how to trade forex
Going long vs going short in forex
You’ll buy a currency pair to go long and sell it to go short. When you ‘go long’ it means you’re buying the base currency and selling the quote currency. For example, in the case of GBP/USD, you go long if you expect the pound to strengthen against the dollar. You’ll earn a profit if your long position on the currency pair increases in price.
If you short (‘sell’) a currency pair, you’d be expecting the base currency to depreciate against the quote currency. Using the same GBP/USD as an example, you could short pounds for dollars. If the dollar strengthens, the price of the pound would have dropped.
This means you can buy more pounds for your dollars than you originally spent, earning you a profit.
