Reveal the meaning of Short selling on Forex
Many of you have already faced with the idea of Short selling, or “going short”. In this article, we want to explain you all the nuances in order to put the pieces back together.
Short selling is used by traders when they have confidence in the depreciation of one currency. Let’s say you know that the rate of a certain currency is going to fall and want to gain profit on this. In such case, you are just setting a sell order on a currency pair where a quote currency, in your opinion, will lose its value. If it does, after some time, you will close this order to make money.
For instance, you can predict that the US Dollar is going to lose positions in the nearest future. In the following step, let’s assume you choose EUR/USD currency pair where the euro is the base currency and the US Dollar is the quote currency. EUR/USD price is 100.00. You click on the sell button, wait for a while for lowering the price. It finally reaches 98.00, just as you thought, so you close your trade. Simple calculus demonstrates that you earned 200 pips of profit by going short.
How to limit the general risks?
However, as with other trading strategies, Short selling involved a risk of making a bad deal. What may go wrong is that despite your forecast the interest rate of a chosen currency raised. It is noteworthy that the value could keep rising without any limits to how far the value could rise. That is why traders are encouraged to put in stop-loss just to be safe.
Why does it look so attractive for investors?
It’s far easier sometimes to predict the rate of which currency is going to fall from the financial news. Take a look at Bitcoin, Ethereum, or other altcoins which had lost value threefold and more since the beginning of the year. Although rather than losing your money you could make profit only by using Short selling on Forex.
Which Forex Broker to choose?
Far not every Forex Broker offers crypto trading on its accounts. At the same time, it’s very important to find a reliable one with good trading conditions. JustForex is one of the main brokers that provides traders the access to the foreign exchange market offering wide choice of trading instruments. There are 13 cryptocurrency pairs including most popular and valuable cryptocurrencies for investors. Minimum deposit is not required.
In order to practice crypto trading at Forex with no investment at all, everyone can open a Demo account.
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