In all market trading, go long means to buy with the expectation that your purchase will rise in value. It has an opposite meaning with going short which expects the value to fall.
When you go long, you profit when the value rises; when you go short, you profit when the value falls.
What New Traders Should Know
For each foreign currency, you buy or sell a currency pair. All currency pairs have a base currency and a quote currency. For instance, USD/JPY = 100.00. Here, the USD, or U.S. dollar, is the base currency and the JPY, or Japanese yen, is the quote currency. This quote shows a rate of $1 is equal to 100 yen.
In a long trade on this currency pair, you are buying, or going long on, the dollar and you’ll simultaneously go short on the yen. In effect, you are selling the yen, just like when you short a stock by selling shares.
How to Go Long
When you’re both buying and selling currency in a forex trading, you can speculate on both the upward and downward movements.
To go long on a certain currency, you open a trade in a buy position, because you believe the base currency is bullish. It is likely to rise in value. At the same time, it also means you are bearish on the value of the quote currency and think it will fall.
Dealing with the pips, you can measure the changes in value in pips: a pip is 0.0001 of the value of the quote currency (except for yen which the value is .01).
Go Long in Forex
Some of the reasons why the traders go long come from technical as well as fundamental developments.
By using fundamental analysis, you’ll be looking at economic news related to the currencies in question. For instance, if news releases start to overshoot or surprise economists’ expectations, this shows that the economy is doing better than many people expected and there’s room for upside on that currency. Therefore, it may be worth buying the currency or going long.
By using technical reasons, a going long often include currency prices breaking through a certain price-level resistance or a price ceiling. This would show surprising strength in the currency’s price mobility and that a new market imbalance may be developing that could turn into a strong trend.
