Long Position Definition. A Long Position in forex trading is the purchase of a currency or currency option with the expectation that the currency will appreciate over a specific time period. For a currency pair when quoted, the long currency is the first one listed in the pair and the price is the “Ask” part of the quote. It is the opposite of a short position. For example, if you expected the Euro to appreciate over time and were given a quote for the “EUR/USD” pair of $1.3010/15, then you would pay $1.3015 for each Euro purchased. Forex traders go long on a currency for an extended period of time when they expect the fundamentals of the respective country’s economy to outperform the other one. A common application is the Carry Trade where a forex trader will go long on a currency when the interest rate differential suggests that the central bank is raising rates to cool down an overheated economy, while the other country may still be in economic recovery. A current example of this phenomenon in 2010 is the “AUD/USD” currency pair.
Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.