What do ‘long’ and ‘short’ mean?


The forex market is bi-directional, meaning that you can trade both ways. You can buy or
sell depending on your strategy. ‘Long’ means to buy, and you will go long when you are
looking for prices to appreciate, or rise. If you are going ‘short’ you are selling because you
are looking for prices to fall. Going short is just as common in currency trading as going
long. If you are ‘square’ or ‘flat’, it means that your buy positions exactly offset your sell
positions, or that you have no positions in the market at all.

Margin and leverage

Through the use of leverage, traders are able to invest a small amount of money and trade
much larger deal sizes. This is useful because the movement in currency rates can be very
small, and larger trades represent larger profits/losses for every pip change in the rate.
Leverage allows you to trade with more money than you have in your account, because you
effectively “leverage” your free balance to open a larger trade.
Leverage is shown as a ratio, for example 1:100.
Note that leverage amplifies both potential profits and losses alike.

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