Forex Currency Trading

1. Currency trading on the Forex spot market always involves trading a currency pair. When you open a position, you purchase one of the currencies in the currency pair and pay for it with the other. So you actually need one currency to be able to purchase the other one. Closing a position is nothing more than reversing the process. If the currency pair's exchange rate has changed between open en closing a position, you made a gain or a loss, depending on how the exchange rate change has developed. It's important to realize that you're not really shorting the market - at least not like you could with equity and futures. For every short position, there exists a corresponding long position in the other currency. Only if exchange rates change, you stand a chance of making money.