What Does Short, Long, Flat And Square Mean In Forex Trading?
Sam Beatson

If you are familiar with trading, you will have heard or used the
terms "bull and bear" market.

The image of the bear fighting the bull refers to the directional
movement of stocks or currency prices up or down.

The bull lifts up the bear with it's horns. The bear crashes
it's giant arms down upon the bull.

The battle ensues and is non-stop.

If a trader is in a trade on the basis that the market is going
to force the price of a currency pair upward this is known as
LONG position.

SHORT position in forex trade is the other side of the coin. When
the price moves down, it is possible to sell the base currency
(ie the GBP in GBP/USD). When the dollar gains strength (ie the
bear - sellers - starts to get the upper hand of the bull -
buyers) the price will be seen to move down.

Later, the trader can "close his position" and a profit has
been made.

These two ways to make a profit and movements in the market are
known as "longs" and "shorts". The position you take will be
long or short if you are entering a trade. Long position is
"buy" position if you like and Short position is "sell"
position. You can remember this because "S" is for SHORT and
for SELL.

It can be confusing in forex trading because you buy and sell in
pairs. The first currency in a pair is known as the base currency
sometimes. So if you are in long position for the pair
"EUR/USD" this means you have bought the Euro (and
automatically sold the Dollar). However, if you bought the
USD/CHF it means you have BOUGHT the dollar and automatically
sold the Swiss Franc.

Later, when you "close your position" it is as though you have
done the reverse. In fact that is exactly what you have done. The
profit/loss you have made depends on the change in value between
the pair, which takes place to the fraction of a second, 24 hours
per day from Australia to the UK (except weekends).

That leaves us with the question, what is FLAT or SQUARE
position.

Well, the answer is simple. What if you decided not to trade at
all? This is known as FLAT or SQUARE position. If you are FLAT it
means you decided to stay out of the market, usually because you
couldn't see an opportunity to trade. If you are a gambler, you
won't care if there is an opportunity to trade or not, you will
miss the value in being flat or square and you will lose your
money.

Being flat is therefore a position. It's a positive position to
be in, because although you are not winning money, you are not
losing it either.

Staying flat is the best thing to do when you're just not sure
or uncertain about trading. This is why it's crucial to get a
thorough understanding of a technical and fundamental strategy
and learn it in "demo" until you're proficient enough and
confident enough in your understanding the market and responding
to it with your trading.




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Sam Beatson lives in Sheffield countryside, UK and owns
http://www.fasttrackforex.com the Forex training crash
course and coaching program via
http://www.fasttrackforex.com/special
He is dubbed "THE Master Forex Trainer".