How does forex trading work?

To trade forex is to essentially buy and sell currencies - with the aim of making some big bucks along the road.Or in other words, you hope that the currency you bought will increase in value compared to the one you sold.Unlike many other financial markets, forex traders can make money on the up when things are going well in the world and also on the down, when things aren't going so well...

Win, win!

But before you start making money, you need to determine whether you want to buy or sell, or in forex terms take a long or short position.

Long vs Short Positions in Forex Trading

If you want to buy (which means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price.

In trader talk, this is referred to as 'going long' or taking a 'long position'.

Remember: long = buy.

If you want to sell (which means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price.

This is referred to as 'going short' or taking a 'short position'.

Remember: short = sell.