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going short?some help please!

Discussion in 'Beginners Bootcamp' started by swingfiddle, Aug 20, 2010.

  1. swingfiddle

    swingfiddle Private

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    i understand that opening a "buy" order (for example in the EUR/USD pair)is that you will make money because you believe that in the future the euro will be more strong and you will close your order earning more usd because at the present you need more USD to get the same quantity of euros.

    but..how you get money with a sell order?i now i should go short when i believe that in the future the euro will get weaker against USD but how does this work?

    i would appreciate very much a simple example many thanks:)
     
  2. Pharaoh

    Pharaoh Colonel

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    If you buy a pair (such as the EUR/USD), then every pip it goes up works in your favor (and every pip down works against you). You would buy it if you think the Euro would gain strength against the US Dollar.

    If you sell a pair (again, let's use the EUR/USD), you gain pips if the price falls. In this case, the price is falling because the Euro is losing strength and/or the dollar is gaining strength.

    For a very real world example, I jumped into the recent downturn of the EUR/USD by selling when the pair was at 1.3064. The price as I'm typing this is 1.2689. That comes to about 375 pips of profit for me. Had I gone long and held the position, I'd be about 375 pips in loss now. I'm trailing my stoploss about 200 pips back, so will get a healthy profit even if the price rises suddenly. I did have the position open over the weekend, but felt that my SL was far enough that I could exit with profit after any but the most monumental of weekend gaps. Happily for me, the gap over the weekend was not too big and my positions are doing well.

    For the inevitable next question someone will ask: Yes, I am hoping it will go lower, but no, I do not know for sure that it will go lower. That's why I've secured at least some of my profit by moving my stop loss past breakeven. It could decide to jump up a huge amount in the next 5 minutes or it could suddenly plunge further. It might stall out around the current level for a few days. Forex is a game of probabilities, not certainties. Since I have a reasonable amount of profit secured, I can wait and see what happens without worrying.
     
    #2 Pharaoh, Aug 23, 2010
    Last edited: Aug 23, 2010
  3. swingfiddle

    swingfiddle Private

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    thanks for your reply:)
     

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