Sunday, March 8, 2009

Buying and Selling in Foreign Exchange Market | ForexGen

In the foreignexchange market, currencies are always priced and traded in pairs. Yousimultaneously buy one currency and sell another, but you can determine whichpair of currencies you wish to trade. For example, if you believe the value ofthe euro is going to increase vis-รก-vis the U.S. Dollar, then you would go longon EUR/USD instrument (currencypair). Obviously, the objective of foreign exchange currencies trading isto exchange one currency for another in the expectation that the foreign exchangemarket rate or price will change so that the currency you bought has increasedits value relative to the one you sold. If you have bought a currency and theprice appreciates in value, then you must sell the currency back in order tolock in the profit. An open trade or position is one in which a trader haseither bought / sold one currencypair and has not sold / bought back the equivalent amount to effectivelyclose the position.

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