Forex Position Trading

Deciding to venture into Forex trading is a big decision. Understanding the main principles of forex trading and the trading philosophy ensures the profit, which you as an investor or trader is looking for.

Incorporating the concept of forex position trading in a day trading environment can result in huge profit from the forex transactions.

In Forex position trading, a long position is a situation in which one purchases a currency pair at a certain price and hopes to sell it later at a higher price. In this case, the trader profits from an increase in price.

This is also referred to as "buy low, sell high". On the other hand, in Forex position trading, if a trader thinks a currency pair will fall, he will sell it with a hope to buy it back later at a lower price. This is known as a short position, which is the opposite of a long position.

In forex position trading, a trader has a long position on one currency of the pair and a short position on the other currency. So, while forex position trading, a trader defines his or her position as an expression of the first currency of the traded pair, which is known as the base currency.

The second currency is known as the counter currency. In forex position trading, the trader takes a long position on a pair when he or she buys the base currency. If the trader sells the base currency, he/she shorts the pair.

For example, if the current rate for the USD/JPY pair in forex position trading is 120.93, which means it takes 120.93 Yen to exchange for 1 Dollar and if the trader buys the Dollar while selling Yen, he is buying or longing the USD/JPY pair.

When the value of the base currency, here the Dollar, is rising, the rate will be moving upwards. If the rate changes from 120.93 to 121.50, it will take more Yen to buy the same amount of Dollars.

If the trader was to sell the Dollar and buy Yen then he or she would be shorting the pair. By taking a long position on the pair in forex position trading, the trader will wish to sell the Dollar back versus the Yen at the higher price.