Hi,
In this lesson “School of Pipsology → Preschool → How To Trade Forex”, it’s saying something about short: “Imagine if you went short EUR/USD and had to deliver $100,000 worth of euros!”.
So, what is short (also for that context) ?
Thank you !
You can find it here.
The term short comes from stock market trading in company shares. The trader would obtain a contract through their broker to deliver X number of shares in so many days time. They do this because they believed the share price was going to fall, so they could make the transaction at today’s price but by the time they had to deliver the shares they would be able to buy them at a lower price than today.
The profit came from being able to buy the shares at a lower price than someone had already agreed to buy them at.
In private retail forex trading, the best way to understand the equivalent transaction is as a bet. You bet that the price will fall and if you are right the broker has to pay you a profit in proportion to the size of your bet. We are not literally short of anything here, its just a term.
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Usually used in context as “going short” or “taking a short position” or “selling”.