Buying and selling: profiting from a rise and from a fall

In traditional investing you only profit if what you bought goes up. In modern trading you can profit in both directions, because you deal in contracts rather than physical assets.

The buy trade — Long

You open a buy when you expect price to rise. You enter at 2000 and exit at 2020: your profit is 20 price units multiplied by your trade size. This is the familiar logic — buy cheap, sell dear.

The sell trade — Short

You open a sell when you expect price to fall. Same logic, reversed order: you sell first and buy later. You enter with a sell at 2000; if price drops to 1980 you close the trade by buying at 1980, and your profit is the difference: 20 units.

People find this strange: how can I sell what I do not own? The answer is that you are not selling real gold — you are entering a contract with your broker on the price difference. That contract does not require ownership; it requires enough margin in your account to cover an adverse move.

Pairs: you buy and sell at the same time

In forex specifically, every trade is a buy and a sell together. When you buy EUR/USD you are buying the euro and selling the dollar in the same instant. When you sell the pair you sell the euro and buy the dollar.

So a pair does not rise merely because the euro is “strong” — it may rise because the dollar weakened. The price measures both currencies together, and this is the key to understanding many moves that look illogical.

A worked example

Notice the result is identical. What matters is reading the direction correctly, not whether the market is rising.