How to profit from a long position

  • Sep 17 2021
  • by
  • Analyst AZA
How to profit from a long position

How to profit from a long position

Buying an asset is more understandable for traders when investing. One of the leading concepts of the international foreign exchange market Forex is a long position.

A long position is a variant of a commercial operation where a trader earns money by increasing the price of an asset. In other words, a trader buys a currency at a specific - fixed price is in a state of expectation until the price of the instrument rises, and then sells funds at a new - overvalued price.

As a rule, it is necessary to wait not a couple of hours (short position), but several days (two or three), which explains the name of the operation. For most forex speculators who have just started taking their first steps in the market, a net long position will be an ideal option for increasing deposit funds. Because its value is influenced by price fluctuations.

From the point of view of market players, long and short trades can be divided in this way. About a long market position, then a trader buys a commodity (currency or asset) at one value to sell it at a different price. Here he is striving with might and main not to miss the chance of exchange growth: at the moment when the player starts the game on a short deal, he knocks down the currency, expecting a decrease in its rate. In other words, the investor makes a profit from the falling forex market.

Do not forget about foreign exchange transactions as well: long and short foreign exchange positions 1) the first way - goods and conditions for the purchased currency prevail over obligations and liabilities in the longest position; 2) option number two: liabilities for the sold currency funds dominate over assets within a short transaction.

Both of the above options can be used interchangeably: this only happens if their volumes, time boundaries, and currency instruments are identical. An example of a transaction using a long position: the simplest, most affordable, and popular option for generating income. For example, we have a deposit that is $ 200. The lot size we will be applying is $ 30 - 0.03 standard lots when leveraged.

The currency instrument used is the popular euro/dollar (EUR / USD) market pair. Based on the graphical analysis of the market, we can understand that the exchange rate of this pair will soon increase (at this stage, the rate is as follows: 1 euro equals 1.2825 dollars). But how exactly can we generate income while using a long position? At the very beginning, we must buy the euro, so that after the purchase, we can sell it at a better price.

To complete the deal, you do not need to spend all USD 200 at once. As stated above, we only use $ 30 at the beginning (using leverage we can increase it to $ 30.000). Now, we can spend this amount to buy euros: 3,000 USD: 1.2825 = 2.339 EUR).

To make a profit and make money in this situation, you need to wait for the euro to rise. It is better to wait for a specific price value to be sure and place an order to sell the euro in advance and not sit at the monitor screen for a couple of days in a row.

We can determine the cost based on the method of technical analysis - $ 1.3512 for 1 euro. Then we set the order, and only after 5 days, the broker closes the operation, selling euros for $ 3.160. In terms of net profit (excluding leverage), we earned $ 160.7 in revenue.

Use a long position wisely! Successful trading! 

Use a long position wisely!


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