To understand opening a long position, let’s use the following simplified values:
Bid: 1 EUR = 1.5 USD
Ask: 1 EUR = 2 USDIf the trader decides to go long, they are buying euros and selling dollars at the ask price, in the hope that the dollar goes up against the euro.
This means that for every 2 dollars you sell, you buy 1 euro.
In time, if the dollar goes up against the euro, this is illustrated with the following:
Bid: 1 EUR = 2.5 USD
Ask: 1 EUR = 3 USDThe traders can now buy back dollars at the bid price, meaning they 1 euro for every 2.5 dollars, thus making 0.5 USD profit.