When it comes to trading, one would often hear terms like Selling Short and Buying Long. As we know currencies in Forex are traded in pairs. The Market‘s daily turn out ranges at $4 Trillion, with millions of individuals trading, including thousands of financial institutions and other companies.
It is imperative to understand all terms used in Forex, such as Selling Short – as explained that currencies are traded in pairs, such as EUR/USD (EURO AND US DOLLAR) – EUR is the base currency whereas USD is the quote or term currency. In this case, it is also important to know that – every position in Forex involves the Selling of one currency and buying another.
With the example above (EUR/USD), if as a trader, you believe USD will be stronger against the EURO, the trader can sell the EURO – and that is called Selling Short.
IF USD = STRONG
TRADER = SELL EURO (Because then the EURO will be weak, then why not sell it – that’s if you believe in your position)
Similarly, If as a trader, you believe the EUR will be stronger as compared to USD – Then the trader can buy the EURO
IF USD = WEAK / EURO=STRONG
TRADER = BUY EURO