Long and Short Currency Trading

Currency futures and options are derivative contracts. These contracts derive their own values from utilization of the underlying assets, which, in this case, are currency pairs. Currencies are always traded in pairs.

For example, the Euro and U.S. Dollar pair is expressed as EUR/USD. When someone buys this pair, they are said to be going long (buying) with the numerator, or the base, currency, which is the Euro; and thereby selling the denominator (quote) currency, which is the Dollar. When someone sells the pair, it is selling the Euro and buying the Dollar. When the long currency appreciates against the short currency, people make money.

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