Long, short and order types

Going long and going short

• Long = you buy, expecting the price to rise. You profit if it goes up.
• Short = you sell first, expecting the price to fall, and buy back lower. You profit if it goes down.

A key feature of forex (and CFDs) is that going short is as natural as going long — because every trade is one currency against another, selling EUR/USD is simply buying USD against EUR. You can profit in falling markets, not only rising ones.

The main order types

• Market order — execute now at the best available price.
• Limit order — execute only at a specified price better than the current one (buy below, or sell above, the market).
• Stop order — execute once price reaches a specified worse level; used to enter on a breakout.
• Stop-loss — a protective order that closes a losing trade at a defined level, capping the loss.
• Take-profit — closes a winning trade at a defined target.

Why orders matter

Orders let you trade with a plan instead of emotion. Setting your stop-loss and take-profit when you open the trade removes the temptation to hold a loser hoping it recovers, or to cut a winner too early out of fear. We explore using them well in the Risk Management track.