In: online currency24 Feb 2011
If you’re new to the foreign currency market you probably believe you can only place a trade when a monetary unit’s price is escalating. That’s not true. In the Forex, you can open a position to sell a currency. This means you can forecast and benefit from a rate decline. This is what’s known as shorting a currency.
To start out, you’ll borrow a lot from the currency trading broker. You will then proceed to sell it. Your aim is to hold on to the pair until it reaches a desired price that will earn you a profit. The prices of course should be in decline. To close the position you’d have to buy the monetary unit pair back and finally, return the lot to the market dealer. Once you pay the spread, the remainder represents your gains.
It’s important you practice shorting a currency if you’re used to going long. You’ll need to know how to react quickly in the event the prices begin to rise.
Forecasting a devaluation of a currency’s rate can be done if using some type of analysis. Economic indicators such as unemployment of a country or Gross domestic Product will help you predict when the value loss could take place. On the other hand, different Forex software avails you with a number of charting mechanisms which can point to the currency’s trends and movement reversals. This will also help you plan your strategy with a more objective view rather than with opinion.