Buying and selling

Beginner Questions
1

Hi everyone,
I’m sure this will come across as a really silly question and I will probably look back at this with huge embarrassment when I’m trading Forex from my very own private island :wink: but can someone explain why there is an option to both buy and sell a lot when you’re executing an order?

2

It’s called “Short-selling” or “Shorting.” It’s a bit tricky to understand until you actually start messing with it, but you are essentially selling in hopes that the value will go down. It’s a very easy thing to understand hands-on, but explaining it is difficult.

The School of Pipsology describes it as this:
“If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called “going short” or taking a “short position”. Just remember: short = sell.”

If you get a demo account and start playing around with “Shorting” it will make a ton more sense than trying to understand the concept.

3

There was a thread on here a while back that covers how shorting works. You can find it by following this link:
http://forums.babypips.com/newbie-island/37719-cant-get-my-head-around.html#post238793

Google “How Shorting Works” for further information- I’m sure there will be plenty.

4

So it wasn’t that stupid a question then!

Many thanks for your explanation. I was struggling a bit with the ‘short’ and ‘long’ concepts but you have put them into context for me. I’ve just started a ‘short’ position in my demo account so that should help the process of understanding.

5

Imagine you have inside information that next week sainsburys is going to have a sale on orange juice that costs £3 today but will cost £2 next week when the sale starts. You can stand outside the shop today and promise shoppers orange juice next week for £2.50. When the sale does occur, you buy the orange juice at £2 and sell it to the shoppers for £2.50 making 50pence profit.
You shorted the orange juice

6

Thanks Hunter.

So on an upward trend, your looking to buy or take the long position while on a downward trend your looking to sell or take the short position?

7

You got it :wink:

8

Nice one, cheers!