A Very NewBy Question, Selling Short? | Forex Factory

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A Very NewBy Question, Selling Short?

  • #1
  • First Post: Jul 8, 2006 7:16pm Jul 8, 2006 7:16pm
I geuss that this is the place to ask so here goes!

I just can not seem to grasp the concept of making pips on selling short on an opening trade.
The idea of buying low and selling high is simple but can someone please explain the concept of opening a trade short and how you gain pips?

Thank You!!
  • #2
  • Jul 8, 2006 7:26pm Jul 8, 2006 7:26pm
Quoting TheBigPicture
I geuss that this is the place to ask so here goes!

I just can not seem to grasp the concept of making pips on selling short on an opening trade.
The idea of buying low and selling high is simple but can someone please explain the concept of opening a trade short and how you gain pips?

Thank You!!
This is the way it works: you borrow securities at present (higher) price, sell them immediately, and return (when you exit a short trade) at lower price. The price diferrence is your profit.

Dane
  • #3
  • Jul 8, 2006 7:33pm Jul 8, 2006 7:33pm
Quoting great*dane
This is the way it works: you borrow securities at present (higher) price, sell them immediately, and return (when you exit a short trade) at lower price. The price diferrence is your profit.

Dane
How do you borrow currency? the only options that I see in my platform are buy/sell at market, entry...
Thanks
  • #4
  • Jul 8, 2006 8:01pm Jul 8, 2006 8:01pm
Quoting TheBigPicture
I geuss that this is the place to ask so here goes!

I just can not seem to grasp the concept of making pips on selling short on an opening trade.
The idea of buying low and selling high is simple but can someone please explain the concept of opening a trade short and how you gain pips?

Thank You!!
YOU want to buy a 2001 Chevy and are willing to pay $10,000.00 because you think you can get $12,000.00 for it.

I know ANOTHER GUY who has one for sale for $8,000.00

FIRST
I sell you the Car {Actually just the Contract} for $10,000.00 and promise to deliver a 2001 Chevy. {Read 100,000 Euros or Yen here}

SECOND
I then take your $10,000.00 over to the other guy and Buy it from him for $8,000.00, Deliver the Car to you and keep the $2,000.00 Difference.

Of course I run the risk of arriving at the other guy's door just behind five additional guys who also want to buy it and now the price has gone up to $12,000.00 in which case I Lose $2,000.00.

Not exactly how it works but the esscence is the same.
I sold {Shorted} 1 Lot 2001 Chevy before I Bought it to Close the Trade and still have the same potential gain as Buy first Sell after.

Clear as Mud?
  • #5
  • Jul 8, 2006 8:09pm Jul 8, 2006 8:09pm
Going long--buying one currency and selling the other at the same time. If price goes up on the currency you buy and then close your position, you make a profit whatever that might be. The first currency quoted is the currency you are buying. The second currency is the one you are selling.

Going short--Selling one currency and buying the other at the same time. If price goes down on the currency you sell and then close your position, you make a profit whatever that might be. The first currency quoted in the currency you are selling. The second currency is the one you are buying.

going short is selling one currency and buying the other. Going long is buying one currency and selling the other.
JOHN 3:16
  • #6
  • Jul 8, 2006 8:14pm Jul 8, 2006 8:14pm
OK, So I am a little dense, no, I still do not get it and thanks for all the replys.
Let me put my question another way, here is a copy of a signal service from another site:

45.
OPEN EUR/CHF SHORT @ 1.5530 (CLOSED 1.5510)
1st Target = 1.5490
2nd Target = Let it run till signal comes.
Stop Loss = ur own SL or wait for signal to close

If I open short at 1.5530 and my first target is 1.5490, that is a loss of 40 pips, is the plan to sell these again later?

How would I make this trade, would I put in an entry limiy buy for 1.5530??
  • #7
  • Jul 8, 2006 8:24pm Jul 8, 2006 8:24pm
keep asking til you get it. I felt so stupid when I started as well. Don't worry, we've all been there. You won't learn unless you ask. Any time you sell(go short) you want price to go down. Cause when you buy, you are buying at a lower price than you sold. If you sold a watch to a friend for $10 and 30 minutes later, that friend didnt want it, you say, I'll buy it back for $8. Well, your friend gave you $10 and you gave him back $8 so, you make $2. If you sell EURCHF @ 1.5530 and your first target is 1.5490, you are buying it back 40 pips cheaper. just like the watch. Yousell it at $10 and buy it back at $8.
JOHN 3:16
  • #8
  • Jul 8, 2006 8:30pm Jul 8, 2006 8:30pm
You don't get The Big Picture.

First of all, forget the conventional buying-selling concept as you found in your local hardware store.

Second, entry and exits are always the opposite. As in your example, your entry is SHORT @ 1.5530 and the 1st TARGETed exit is 1.5490; meaning: you SELL @ 1.5530 and then BUY @ 1.5490. (This is BUY @ 1.5490 and SELL @ 1.5530 in reverse.) So you profited 40 pips.

In your example, you forget that after you sell, you have to buy to complete the cycle, or transaction, or whatever it is called.

If you put entry limit buy @ 1.5530, then you put take profit @ 1.5490.
  • #9
  • Jul 8, 2006 8:33pm Jul 8, 2006 8:33pm
ignore the last sentence, my mistake.

Your signal said SHORT, meaning you shouldn't put entry limit buy, but entry limit SELL. Then you put take profit @ 1.5490.
  • #10
  • Jul 8, 2006 8:40pm Jul 8, 2006 8:40pm
Quoting TheBigPicture
OK, So I am a little dense, no, I still do not get it and thanks for all the replys.
Let me put my question another way, here is a copy of a signal service from another site:

45.
OPEN EUR/CHF SHORT @ 1.5530 (CLOSED 1.5510)
1st Target = 1.5490
2nd Target = Let it run till signal comes.
Stop Loss = ur own SL or wait for signal to close

If I open short at 1.5530 and my first target is 1.5490, that is a loss of 40 pips, is the plan to sell these again later?

How would I make this trade, would I put in an entry limiy buy for 1.5530??
put in an entry limit SELL for 1.5530
Then Later BUY it @ 1.5490.

So You Bought @ 1.5490 and Sold @ 1.5530 for a Profit of {dah dah} 40 Pips.

The only thig you did different was you Sold First and Bought Second but you still Buy Low Sell High.
  • #11
  • Jul 8, 2006 8:43pm Jul 8, 2006 8:43pm
Quoting Bemac
put in an entry limit SELL for 1.5530
Then Later BUY it @ 1.5490.

So You Bought @ 1.5490 and Sold @ 1.5530 for a Profit of {dah dah} 40 Pips.

The only thig you did different was you Sold First and Bought Second but you still Buy Low Sell High.
All you guys have been great!! I have been pouring over my ebooks and forums all day, I'm glad that I asked, NOW I Get IT

Thank You!
  • #12
  • Jul 8, 2006 8:45pm Jul 8, 2006 8:45pm
Keep asking dude, we'll keep answering.
JOHN 3:16
  • #13
  • Jul 8, 2006 9:08pm Jul 8, 2006 9:08pm
Hey Bigpicture.......

I just wanted to let you know you have come to what I have found to be the best forum on the web, and I have looked at quite a few, the folks her are knowledgeable and extremely helpful, I am glad I found this place and I welcome you and wish you the best in your trading endeavours.
Same Whore .... Different Dress
  • #14
  • Last Post: Jul 8, 2006 9:29pm Jul 8, 2006 9:29pm
Quoting TheBigPicture
All you guys have been great!! I have been pouring over my ebooks and forums all day, I'm glad that I asked, NOW I Get IT

Thank You!
So now you should realize that a Market you are Not In can still offer opportunity when it is showing signs of Topping Out.

Short that Market with the intention of Buying it to Close the Trade later at a Lower Price. Just remember, It could continue to rise putting you in a losing position.

Good Luck and hang around. Tonnes more info here.
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