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Alison Heyerdahl
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Alison Heyerdahl
Edited by
Alison Heyerdahl
Head of Content

Alison Heyerdahl is the Head of Content at FxScouts and a financial writer with extensive experience in Forex trading, broker analysis, and market research. She has reviewed 100+ brokers, publishes weekly YouTube trading videos, and co-hosts the “Let’s Talk Forex” podcast to help traders make informed, safe decisions.

Learn more about Alison Heyerdahl
Author
Author
Chris Cammack
Partner Manager and Financial Writer

Chris Cammack is the Partner Manager and a financial writer at FxScouts. Chris builds and maintains our relationships with our partners to provide our users with the best Forex trading experience.

Learn more about Chris Cammack

What is Short Selling?

Reading time: 3 min | Basics | Beginner Forex

In Forex trading, it is possible to profit from the falling prices of a currency through selling short. Short selling is used when the trader anticipates of a price drop of the asset and is unique to CFD trading. In short selling, a trader opens a trade by selling a currency pair as part of an agreement with the market that the trader will buy the same asset at a future date.

If the price of the currency pair declines as expected, the trader can close the position manually by using with a buy action, or automatically with a take profit order to make a profit on the trade.

The Mechanics of a Short Trade Explained

To understand short selling better, let’s first examine what happens when a long (buy) trade is placed. If you buy the EUR/USD currency pair, you actually buy the euro (the base currency) and simultaneously sell the U.S. dollar (the quote currency).

If the price moves higher after you’ve opened the trade, you can close this long (buy) position by selling the pair at a higher price. In this case, you will have made a profit.

With a short (sell) trade, the process is exactly the other way around. If you sell the EUR/USD, you are buying the U.S. dollar (the quote currency) and at the same time, you are selling the euro (base currency). If the price moves lower after you’ve opened your short trade, you can close this short (sell) position by buying back the pair at a lower price.

In this case, you will have made a profit. In effect, a short (sell) trade on the EUR/USD is exactly the same as a long (buy) trade on the USD/EUR because the euro is sold while the U.S. dollar is bought.

However, on your Forex trading platform, this currency pair is only quoted as the EUR/USD which means that there isn’t an option to place a long (buy) trade on the USD/EUR. So, to buy the U.S. dollar against the euro, your only option is to enter a short (sell) trade on the EUR/USD.

By only using one form (e.g. the EUR/USD) to combine two currencies in a pair, the process of analysing and trading currencies is simplified and streamlined. If every pair had two forms, traders would have to deal with different price quotes, pip value calculations, and charts.

For example, if the EUR/USD traded at 1.11111 dollars per euro, the USD/EUR would be quoted at 0.90000 euro per dollar.

Handy tip: Any trade action (buy or sell) is focussed on the base currency of a currency pair. The base currency is the first currency in any pair. For example, if you open a long (buy) trade on the EUR/USD, you are buying the euro which is the first currency in this pair. If you open a short (sell) position on the EUR/USD, you are selling the euro.

Short Sell Trade - Example

In this example, a bearish trend is observed on the USD/ZAR currency pair. After a decent move lower, a short entry is taken as the price retraces against the predominant downtrend. Soon after the short trade is placed, there is a resumption of the bearish trend and the short position moves deep into profit.

short selling zar fx

At which Prices is a Short Trade opened (Bid) and closed (Ask)?

A short (sell) trade which is executed with a market order will be filled at the best (highest) bid price which is available at that moment. When a short trade is liquidated, it is closed at the lowest ask price which is available at that moment. To see how the bid and ask prices are plotted on a Forex chart, take a look at our guide to Forex trading for beginners.

Conclusion

Unlike a short stock CFD trade, that theoretically carries unlimited risk, short selling a currency pair carries exactly the same risk as buying it. In essence, the mechanics of long and short currency trades are the same. The only difference is direction: a short position will profit when the price declines, while a long position profits when the price moves higher.

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Meet the Experts Behind Our Unbiased Reviews

Chris Cammack

Partner Manager and Financial Writer

Chris Cammack
Chris Cammack is partner manager and senior financial writer at FxScouts, specialising in broker relations and forex market analysis. As the former Head of Content (2019–2024), he set editorial standards for all content published at FxScouts, including broker reviews, broker comparison pages and education. With over a decade of experience in editorial management and partner relations, Chris builds and maintains our relationships with our partners to provide the best Forex trading experience for our users. He also co-hosts the “Let’s Talk Forex” podcast with Alison Heyerdahl, where he explores trading strategies, industry news, and macroeconomic trends to help traders navigate the markets with confidence.

Alison Heyerdahl

Head of Content

Alison Heyerdahl
Alison Heyerdahl is the Head of Content at FxScouts and an experienced financial writer with extensive hands-on experience in the Forex trading industry. She specialises in Forex trading, broker analysis, and market research, with a focus on helping traders navigate the complex world of online trading safely and confidently. Alison has tested and reviewed more than 100 Forex brokers, assessing everything from regulatory status and trading conditions to platform features and customer support. Her goal is to provide honest, detailed, and practical insights that traders can rely on when choosing a broker. She’s also produced more than 100 educational videos for the FxScouts YouTube channel, where she explains trading concepts in a clear, accessible way. As the co-host of the “Let’s Talk Forex” podcast, Alison shares expert commentary on broker reliability, trading strategies, and market developments—always with a focus on transparency and trader protection.

Ida Hermansen

Financial Writer

Ida Hermansen
Ida is a financial writer with a passion for cryptocurrencies, blockchain networks, and Forex trading. A dedicated crypto trader, she developed a deep interest in Forex technical analysis and price action, continually expanding her expertise in market trends and trading strategies. With a background in digital marketing, SEO, and content strategy, Ida combines her analytical skills with clear, engaging writing to help traders navigate the ever-evolving financial markets. She stays up to date with the latest Forex and crypto developments, researching the best trading environments for new and experienced traders alike.

Stefan de Clerk

Financial Writer

Stefan de Clerk
Stefan is a financial writer and Forex trading enthusiast with over a decade of experience creating in-depth content on finance and technology. His deep interest in geopolitical events, big data, and market sentiment fuels his passion for analyzing how global factors shape financial markets. With a background in marketing and financial research, Stefan believes that Forex trading offers the best insight into the pulse of the world economy. Committed to delivering well-researched, unbiased, and objective information, he helps traders navigate the markets with clarity and confidence.
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