In the FOREX, a trader can enter the market as a buy position (long) or a sell position (short). This is a tremendous advantage in the overall trading strategy. Since a trader can buy or sell when entering the market, it matters little if the currency he or she is trading is trending up or down.
HIE FOREX PROFITING
Therefore, traders also can take advantage of strong up or down trends for their inception. This can be done because there are two sides to every currency cross-rate. Let's take a closer look at the Euro (EUR) currency pair. The EUR is paired first with the U.S. dollar (USD). Since it is paired we first, it is the base currency.
The FOREX cross-rate transaction involves the buying of one currency and the selling of the other. In this case, since the EUR is the base currency in this pair, we will be buying and selling U.S. dollars when we expect prices to rise. If we expect prices to fall, then we will sell EURO and buy U.S. dollars.
HIE FOREX PROFITING
The wonderful part about this intricate process is that it is nearly seamless through the broker software. The chart software and the broker software are in agreement with all sides of the currencies. Therefore, when we look at a chart and expect prices to rise, we buy. When we expect prices to fall, we sell.
When a trader believes that market prices will move higher, the trader will take a bay position in the market. As long as the trader sells back at a higher price, then he or she has captured profits. When a trader believes that prices will move lower, the trader will take a sell position in the market. As long as the trader buys back at a lower price, then he or she has captured profits.
If a trader has entered a buy position and then must sell back at a lower price than the buy position, the trader takes a loss. If a trader who has entered a sell position and then must buy back at a higher price than the sell position, the trader takes a toss.
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