The following are the price points you have to consider when trading in Forex:

  • Entry Price – The price you determined to enter the trade.
  • Stop Loss – The price point where you will exit the trade in case the trade went opposite of your expectations.
  • Take Profit – The price point where you will exit when the trade hit your predetermined profit level. There may be one or more Take Profit on a trade.

Long Trade

In Forex, long means buy. In this situation, you are purchasing the base currency and selling the counter currency. For example, when you go long in GBPUSD, you are purchasing GBP and use USD to pay for it.

When you expect the price of a currency pair to go up (bull), you’ll go long and sell it when the price goes higher.

Using the 3 price points mentioned above, by going long, your take profit is above the entry price and your stop loss is below the entry price. See below for the illustration.

The distance between your entry price and stop loss, and entry price and take profit, depends on your trading strategy and your money management.

Short Trade

Short trade is the opposite of long trade.

In Forex, short means sell. In this situation, you are selling the base currency and buying the counter currency. For example, when you go short in GBPUSD, you are selling GBP and receives USD in exchange.

When you expect the price of a currency pair to go down (bear), you’ll go short and buy it back when the prices lowers.

Using the 3 price points mentioned above, by going short, your stop loss is above the entry price and your take profit is below the entry price. See below for the illustration.

Similar to long trade, the distance between your entry price and stop loss, and entry price and take profit, depends on your trading strategy and your money management.