Quote:
Originally Posted by anzsai
I don't get it,how is it possible to buy and sell currencies at the same time?From the demo account(moneyforex),only 1 used margin (example: EUR/USD:1.3270,so USD 500 is used to buy EUR 10000 and sell USD 13270 considering the spread is 2) for 1 certain trade.
I may understand the buying part,but what about the selling part?  |
You've stated it incorrectly in your example. You do not use $500 to make a 10,000 EUR/USD trade. The $500 is only a kind of security deposit. It's not actually part of the currency transaction.
As for your initial question about how one can buy and sell at the same time, remember that when you do a forex trade you are trading the exchange rate between a pair of currencies. That means you are kind of doing a spread trade between the two - holding a long position in one simultaneous with a short position in the other.
As I indicated in an early post when you take a long position in EUR/USD you are borrowing USD and then converting that in to EUR. To use you example quote, for a 10000 EUR/USD trade at 1.3270 you would end up with a liability (short position) of 13,270 USD and an asset (long position) of 10,000 EUR.
Reverse the whole thing if you are going short. In that case you would borrow the EUR and convert it in to USD.