Active Trader
Mar 4, 2014
Once you have successfully opened a demo account, your first thought would be to open a buy or sell order. In this lesson you will learn when to buy and when to sell. You will also learn from Picture illustration different ways to open and close a buy/sell order from the mt4 platform in the next lesson.

Moving to a detailed studying of terminology, we will try to make a deal for a start with concept of the foreign exchange position in general. So, compliance of requirements and obligations of transactions in exchange market is called as the foreign exchange position. Thus, from a position of the buyer there are requirements in acquisition of currency, and from a position of the seller - the obligation for delivery of currency. You already know that any requirements and obligations are expressed in specific currency. The foreign exchange involves an open and close deal.

The clear understanding of how to open a position is very important for beginners. Open positions is any incomplete transaction of buy or sell order for a currency pair. During an open position the trader is exposed to risk since dynamics of currency price fluctuates at this stage. Therefore, the trader can get profit (or loss) from rate fluctuations of currencies. Among traders also the formulation "square" (English is known - square), is designated by this word a status at which there is no open position.

When the trader makes a buy order he has a long position, while a sell order means a short position.

Let's consider now in more detail these terms.

"To buy when the price of a commodity is low, and sell at a higher price" perfectly captures the essence of long positions. Opening a long position, the trader assumes that the price of the purchased currency will grow. If after the position opening or acquisition of currency the price of it raises, dealers will have profit from a long position.

Use of long positions less risky, especially for beginners and the size of profit it is possible to receive more. Decrease in risks is explained by that at long positions players do not accept any debt obligations, risk only the enclosed amount of own currency. If to speak briefly, it is possible to lose only that is enclosed. Minus of such position is that for earnings the trader needs more time whereas usually it makes transactions during one day trading.

All sell orders (short positions) are closed much quicker and are in the market smaller period. It also is clear, after all currency rates always falls quicker, than increase. On short positions large players with a considerable financial capital have big profit.

It will be useful to remind once again that opening of the foreign exchange positions is always (!) interconnected with currency risks as for the period of execution of requirements and obligations (position closing), currency rate can exchange in adverse side. Therefore, the trader can lose and suffer losses.

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