Short
Trading BasicsA trade position where you sell a currency pair expecting it to fall. Going short on EUR/USD means selling euros and buying US dollars.
What Does Going Short Mean?
Going short means selling a Currency Pair with the expectation that its value will decrease. When you short EUR/USD, you are selling euros and buying US dollars. If EUR/USD drops from 1.0850 to 1.0800, your short position profits by 50 Pips.
Short Selling in Forex vs. Stocks
Unlike stock markets where short selling requires borrowing shares, forex short selling is straightforward. Because every forex trade involves buying one currency and selling another, going short is as simple as going long. There are no special requirements, borrowing fees, or uptick rules. This is one of the key advantages of forex trading.
Short Position Example
You expect GBP/USD to fall after a weak UK GDP report. You sell one mini Lot at 1.2650, with a Stop-Loss at 1.2690 (40 pips) and Take-Profit at 1.2570 (80 pips). If GBP/USD drops to your target, you profit 80 pips x $1 = $80. Traders can profit from falling markets just as easily as rising ones.
Related Terms
Long
A trade position where you buy a currency pair expecting it to rise. Going long on EUR/USD means buying euros and selling US dollars.
Buy
To open a long position by purchasing a currency pair at the ask price. You buy when you expect the base currency to strengthen against the quote currency.
Sell
To open a short position by selling a currency pair at the bid price. You sell when you expect the base currency to weaken against the quote currency.
Bearish Engulfing
A two-candle bearish reversal pattern where a large red candle completely engulfs the body of the preceding green candle. It signals strong selling pressure after a rally.