Short EUR/GBP or Long GBP/EUR?

tomorton

Legendary member
8,396 1,338
In general terms, shorting is held to be more risky than going long because price can go infinitely high, so your potential loss on a short is unlimited, whereas it can only go as low as zero, so the loss on a long is limited.

So what about opposing pairs as above? Is it really riskier to go short on the EUR/GBP than to buy GBP/EUR?
 

stefcio2002

Junior member
19 3
In general terms, shorting is held to be more risky than going long because price can go infinitely high, so your potential loss on a short is unlimited, whereas it can only go as low as zero, so the loss on a long is limited.

So what about opposing pairs as above? Is it really riskier to go short on the EUR/GBP than to buy GBP/EUR?

:confused:

A long going to zero means the currency you are buying gets litterally worthless (has zero value or does not exist anymore).

1- Should something like that happen, I guarantee you we will all have other problems than trading forex. :cry:
2-Use stop loss. :idea:
 

Martinghoul

Senior member
2,690 276
No, there are no real asymmetric tails on these distributions in FX. However, there are some curious effects, such as Siegel Paradox.
 
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ffsear

Senior member
2,242 489
In general terms, shorting is held to be more risky than going long because price can go infinitely high, so your potential loss on a short is unlimited, whereas it can only go as low as zero, so the loss on a long is limited.

So what about opposing pairs as above? Is it really riskier to go short on the EUR/GBP than to buy GBP/EUR?


Not sure about your broker, but mine has a larger spread for GBP/EUR
 

fxstrategist

Established member
604 16
When they say that a short is riskier because the price of the asset may go indefinetely higher in theory is only referred to stocks. The stock of a company in "theory" may go indefinetely higher and only drop to Zero. But in Forex that does not apply, because a currency pair in "theory" may go indefinetely higher or lower, it has no limits, but then again, this is ONLY in theory.
 

tomorton

Legendary member
8,396 1,338
So a currency pair could fall to 0.0001, but it can't really go to zero because that would need the one currency to have been abandoned by the issuing country/bloc, is that right? And of course that would be executed a long way before 0.0001.

So a forex long and a short are (only) equally risky (in theory)?
 

NVP

Legendary member
37,758 2,100
In general terms, shorting is held to be more risky than going long because price can go infinitely high, so your potential loss on a short is unlimited, whereas it can only go as low as zero, so the loss on a long is limited.

So what about opposing pairs as above? Is it really riskier to go short on the EUR/GBP than to buy GBP/EUR?

what ?..........:eek:...........assuming some brokers offer both......surely its just about the % moves re the lowest denominator currency ..........the dynamics are alway the same on both charts re GBP and EUR seperate behaviours

although I understand your point .........perhaps you need to consider this in terms of absolute currency indexes

ie is it safer to buy GBP index moves than sell GBP index moves ??? ....treating GBP like a stock

N
 

Arip

Newbie
6 0
In general terms, shorting is held to be more risky than going long because price can go infinitely high, so your potential loss on a short is unlimited, whereas it can only go as low as zero, so the loss on a long is limited.

So what about opposing pairs as above? Is it really riskier to go short on the EUR/GBP than to buy GBP/EUR?

Unless you think one of the two currency will reach 0 at some point just choose the standard EUR/GBP.
 

tomorton

Legendary member
8,396 1,338
What I hadn't reasoned out was that no currency exchange rate can reach 0 unless one of the pair already doesn't exist by that point.
 
 
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