Forex traders can aim to profit whether a currency pair is rising or falling. That's because every trade involves two currencies: you buy one and sell the other.
Going long vs. going short
- Long (buy): You buy the pair expecting the base currency to strengthen.
- Short (sell): You sell the pair expecting the base currency to weaken.
Eg: with EUR/USD at 1.1000:
- Buy, and price rises to 1.1050: +50 pips.
- Sell, and price falls to 1.0950: +50 pips.
- If price moves the other way, both trades lose the same 50 pips.
How currency pairs work
In EUR/USD, EUR is the base currency, and USD is the quote currency. The price shows how much USD you need to buy 1 EUR. Buying the pair means buying EUR and selling USD; selling the pair means the reverse.
Why shorting is simple in forex
Selling a currency pair is as normal as buying it. In stocks, short selling means borrowing shares and can face extra restrictions after sharp falls. Brokers may still set their own conditions and costs, so check yours.
Trading both directions is not a guarantee
Being able to go long or short doesn't make a trade profitable. The market must move your way, and leverage can magnify losses as well as gains. Use a stop-loss and size positions carefully.
Related reading: [What Is a Stop-Loss in Forex?], [How Much Should You Risk Per Trade?], [What Is a PIP?], [Demo Trading]
This article is for educational purposes only and is not financial advice. Forex trading involves significant risk.
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