Review Question
If you think that EUR is going to weaken against GBP, what position would you take?
- Long EUR and short GBP
- Short EUR and long GBP
- Long EUR
- Short GBP
Answer:
2 Correct. If you believe that EUR will weaken in the future, you should sell it now and repurchase it later at a lower price. Likewise, if you believe that GBP will strengthen in the future, you should purchase it now and sell it later at a higher price.
Summary
Mechanics of Spot Trading
- In a currency trading, we can summarize which party buys the base currency and at which price.