Long

DEFINITION of Long

Long is a margin bull position. In trading, long points a position that makes a profit if an asset’s market price increases. Usually used in context as ‘taking a long position’.

WHAT IT IS IN ESSENCE

Taking this position doesn’t necessarily mean buying an asset. Derivatives like spread bets, CFDs and futures contracts all provide the facility for traders to take this position on a market without actually buying the underlying asset.

It is the opposite of going short or shorting, which means taking a position that makes a profit if an asset’s market price falls.

When you are trading foreign currency, you are simply placing a buy order on a currency pair. In forex trading, all currency pairs have a base currency and a quote currency. The quote usually looks something like this: USD/JPY = 100.00. The USD is the base currency and the JPY is the quote currency.

HOW TO USE

When a currency pair is long, the first currency is buying while the second currency is selling short. Taking this position on a currency means that you buy it, hoping that the price will rise. It is expressed in terms of the base currency.

Remember that every FX trading position requires a trader to go long in one position while simultaneously going short in another.

If a trader is in a trade on the basis that the market is going to force the price of a currency pair upward this is known as the same position.

The position you take is “buy” position.

Some of the reasons that traders go long come from technical and fundamental developments. From a fundamental perspective, economic news releases can start to overshoot or surprise economists’ expectations.

This shows that the economy is doing better, and therefore, it may be worth buying the currency or going long.

Another fundamental reason is when a central bank announces its plans for monetary tightening. Which historically tends to lift its currency’s value.

Traders also tend to go in this position when the currency price comes down to a well-defined support level or a price floor.