In the forex market, each currency quote is provided as a ‘two-sided
transaction.’When you short sell a currency pair, you are effectively
selling the base currency and buying the quote currency in expectation
that the value of the of the currency pair will fall.To get more news
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Take EUR/USD for example. If you are selling the EUR/USD currency
pair, you are not only selling Euros; but you are buying dollars.
Because of this, no ‘borrowing,’ needs to take place to enable the short
sale. As a matter of fact, quotes are provided in a very easy-to-read
format that makes short-selling more simplistic.let‘s assume we
initiated a short position for $100 000 and sold EUR/USD when price was
at 1.29. If the price has moved lower, the trader could realize a profit
on the trade (excluding commissions and fees). But let’s assume for a
moment that our trader expected further declines and did not want to
close the entire position. Rather, they wanted to close half of the
position to cover the initial cost, while still retaining the ability to
stay in the trade.
The trader that is short $100 000 EUR/USD can then manually enter in
0.5, then click on the ‘Close’ button to begin the trade closing process
of 50k - offsetting half of the 100k short position that was previously
held -see image below.
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Our trader, at that point, would have realized the price difference on
half of the trade (50k) from their 1.29 entry price to the lower price
they were able to close on. The remainder of the trade would continue in
the market until the trader decided to buy another 50k in EUR/USD to
‘offset,’ the rest of the position.
