Long And Short Positions
A personal story...
When I started trading Forex I was completely naive, Long and Short positions, no problem!
I was Long one Currency pair and decided to also go Long another, here I will highlight two instances... The first time I was Long EURUSD and also went Long GBPUSD. The second time I was Long EURUSD again but this time I also went Long USDCHF.
The first outcome, I lost twice as much as I anticipated as the market turned against me, both EURUSD and GBPUSD dropped to take out my Stop loss.
The second outcome, I made nothing. EURUSD did as I expected and rose and hit my Target, USDCHF fell and took out my Stop loss. At the time I was trading a 1:1 Risk:Reward “Forex strategy”.
I was a little foxed by this and decided to find out what was going on...
After searching for not too long I discovered Currency/Forex correlation. After reading the subject in quite some depth, from then on I realised when trading more than one Currency pair I had to be aware of the implications of taking out a new position in another (be it Long or Short).
You will read more about Currency Correlation later in this guide or you can jump straight to it here