need help with some terminology

[mrlj22]

although I've read both books by cornelious luca
I've failed to learn what going short or long means
I thought i figured it out that short was to sell long
was to buy but in most posts I read that doesn't seem to be the
case.

also Jpy/usd okay Jpy is base currency does this mean on a chart
that 1 jpy = whatever the chart is at lets say 1.45 so in my misundersting 1jpy= $1.45 ????

anyone care to show me the error of my way?

the Traders Glossary under the main menu here

http://www.moneytec.com/modules.php?...ex+Glossary#87


Short position

Selling a currency in which you have no position in anticipation of it falling in value. At that point you will be able to "cover" your short by buying back the currency at a lower price. (If physical delivery of the currency is involved the short seller will need to borrow the currency in order to make the delivery to the buyer). In foreign exchange when the base currency in the p is sold the position is said to be short in that currency. It is understood that when the base currency in the p is ’short’ the second currency will be ’long’.

Long Position

In foreign exchange trading when the base currency in the p is bought the position is said to be long in that currency. It is understood that when the base currency in the p is ’long’ the second currency will be ’short’.

[mrlj22]

say were talking about the Jpy/usd . the jpy would be the base
currency so if I sell Jpy I'm buying usd? so I would be short Jpy
or long on usd? is that correct?

also with Jpy/usd does this mean on a chart
that 1 jpy = whatever the chart is at lets say 1.45 so in my understing 1jpy= $1.45 ????
is that correct? thank you for your reply.

[peteuk]

USD/JPY 115.88

Short = sell $ = When you sell the first (base) currency ($) you automatically buy the second (counter) currency (JPY). When you sell you are expecting the value of the $ to drop compared to the JPY. For every $ you sell you will get 115.88 JPY. The idea is that you sell the $ buy it back cheaper. So if the price drops 115.88 to 115.87 it will cost you 115.87 to buy back your $ you will have .01 JPY left over which is your hsome profit!

Eg: You sell $100000 @115.88 get JPY11588000 (100000 x 115.88).
You then buy back $100000 @ 115.87 it costs you JPY11587000 (100000 x 115.87). You make 100000 x .01 JPY = 1000 JPY

Long = buy $ = When you buy the first currency ($) you automatically sell the second (counter) currency (JPY). You are expecting the value of the $ to rise compared to the JPY. For every $ you buy it will cost you 115.88 JPY. The idea is that you buy the $ then sell it again at a higher price. So if your $ cost you 115.88 to buy the price rose to 115.89 you could sell your $ for 115.89 making you a hsome profit of .01 JPY.

Eg: You buy $100000 @115.88 it costs you JPY11588000 (100000 x 115.88). You then sell $100000 @ 115.89 you get JPY11589000 (100000 x 115.89) making you 1000 JPY.

Whatever you buy or sell you have to buy or sell back to close a position take your profit.

Now all you have to do is work out which way the currency will go you'll be rich!

Does that help or has it confused you more?

Here's your test for today. GBP/USD is 1.6169 you expect the price to drop to 1.6105. What do you sell what do you buy what are the figures how much profit do you make on 100000? For the purpose of this exercise forget about dealer spread just work on a price of 1.6169 we'll do spreads in lesson 799

Pete

[gazelle]

Thanks Peteuk that helped me out I was having difficulty in this area also - will do a few examples so I can get a grasp on the concept.

[peteuk]

I found a fly good web site which explains things in plain terms it was a great help to me when I was starting out couldn't get my head round whether I should be buying or selling (not good in this business!) or work out how much my last trade cost me!

http://fxtrade.oa.com/currency_trading/overview.shtml

(disclaimer)Oa are marker makers I believe but never having traded with them I cannot endorse them as a reputable company or otherwise.

Pete

[mrlj22]

peteuk

I go short (sell GBP) which means I'm buying the USD
which I think is going to increase in value. I sell 100000 gbp@1.6169 which cost me $161690 usd.
the GBP drops to 1.6105 which I buy back. (100000 x 1.6105) = $161050 subtracted $161690 = $640 profit that took me longer that I will publicly state to figure out man I make things complicated.
thank you for your help which I thought I understood
fully by your explanation until I tried the math now I really do underst thanks again.

[mig928]

Try it on usd/jpy or usd/chf. You'll get confused again. Then try it on a cross like eur/jpy you'll be bewildered.

Or go here to do the math for you.

http://www.oa.com/products/fxmath/profit.html