Hi guys,
Very new to the Forex world and am slowly working my way through Babypips school.
Don’t know if i am looking at things from the wrong perspective, but can’t understand how you can sell a currency to buy another while holding neither.
i.e If i wanna trade EUR/USD, how is it i can trade using GBP that i am holding in my account?
haha welcome to forex. Honestly you are not buy anything. I will let Clint explain it he is way better than me all I will do is confuse you even more.
it’s easy. Don’t think of it as buying and selling. Just think of it as betting on whether it goes up or down. Place your bet, win or loose.
Are you saying we are gambling 
You NEVER own the currencies you trade. You only profit or lose the difference between them from the time you open a trade, until the time it closes.
So, you never really swap out of GBP to begin with.
And to sell something you don’t own is to look at it incorrectly.
We are dealing with pairs in spot forex.
If you are trading EUR/USD, and you BUY, if the euro rises, you profit the difference. If it falls, you lose.
If you SELL the EUR/USD, you are tecnically BUYING the USD. If the pair rises, you lose money, if it falls, you gain.
You are either long the first currency in the pair, or the second.
That’s not the exact way things occur, but it helps to understand how you can sell something you don’t own in either case.
You’ll eventually get a better grasp on it, just take your time, and don’t overload anything;)
Yes:D
All of us.
Even the disillusioned that think they don’t;)
Just imagine it as a prepaid cover charge to enter the trading room where all the different currencies are at your disposal.
What you can use inside that room and how much of it can be used depends on how much u plonked as the cover charge.
Try to imagine it that way.
This brings back memories of when i first started out trading, i was always thinking how the hell do i sell something that i don’t own!!
And this question never stops either, try explaining to someone what you do when you say you trade financial derivatives for an income. They always have that blank face 
Hi StevieB,
I to am a newbie and had the same issue when I first started. You are looking at it to practically, you physically do not need to have those currencies in your possession in order to trade them. The best place to get an understanding of FOREX is to start with the School of Pipsology in the tab above (I can’t post the link as I’m still a newbie but the information you need is found in the section “how do you trade forex” in the preschool section. I would suggest going through the whole school before you start trading. I did a short course which gave me the basics and have since found the subject interesting and found this great resource which will broaden my knowledge.
Also the blogs are great too!
Good luck! We are all here to help each other, so any questions, please ask.
Happy Trading 
One word: Derivatives
This is what you are trading, a financial instrument that tracks the price of the underling asset, in this case the actual currency. So you never have ownership, its a speculation ‘bet’…simples
2373stevieb
If you hold £10000 and while listening to the news you come to think that the value of the Euro vs the Dollar could somehow be impacted, you are shrewd to realise that as a holder of Pound Sterling there is no direct way for you to gain some kind of exposure to the EUR/USD currency pair.
The way this is solved in the world of global foreign exchange is with a chain of transactions that result in money being exchanged between different currencies to achieve a desired result or effect.
So for example:
The current quoted EUR/USD rate is 1.2345
This says that 1 whole monetary unit of the base Euro currency buys or is worth 1.2345 whole monetary units of the quote USD currency.
If the base currency increases in strength or value, it will come to command more of the quote currency eg EURUSD 1.3456.
If the base currency decreases in strength or value, it will come to command less of the quote currency eg EURUSD 1.1234
If the quote currency increases in strength or value, it will come to require more of the base currency in exchange.
If the quote currency decreases in strength or value, it will come to require less of the base currency in exchange.
If you say you expect the euro to increase against the dollar (or dollar to decrease against the euro), you are saying you soon expect it to command more than 1.2345 dollars. To take advantage means u have to obtain some dollars and use those to buy euros. If you obtain 1.2345 dollars and buy euros you will get 1 euro. If you wait a few days and were right about euro strength, when u exchange your euros back you get for example 1.3456 dollars and made a profit.
If you say you expect the euro to decrease against the dollar (or dollar to increase against the euro), you are saying you soon expect it to command less than 1.2345 dollars. To take advantage means u have to obtain some euros and use those to buy dollars (change out of the weakening currency). If you obtain 1 euro and buy dollars you will get 1.2345 dollars. If you wait a few days and were right about euro weakening, when u exchange your dollars back you get for example 1.098 euros (more than your initial 1 euro as the rate fell to EURUSD 1.1234) and made a profit.
How you get in and out of the dollars and euros you need while holding GBP comes down to EUR/GBP and GBP/USD, the published rates allowing you to exchange your money out.
So to do the first trade you would exchange ur GBP into dollars using the gbpusd rate then into euros using the eurusd rate. The second trade you would exchange ur GBP into euros using the eurgbp rate then into dollars using the eurusd rate.
Now of course you can see that once you change out of GBP, the two rates that helped you get into dollars or euros move as well like the pair you are speculating in.
This means even after you did either trade above, that your profits might take a hit (weakening pound) or bounce (stronger) when you change your profits back into the Queen’s faces - this is foreign currency risk exposure and is dealt with one way by timing the exchange back.
When you’re trading with a broker, the chances are you will not be trading currencies literally. But what will happen is that the broker will show you the market rates so you can make decisions but when you click to trade your money isn’t moved around as above. The broker may or may not be caused to trade (with a bank) by your click but he will in any case promise to pay you profits you gain from movement in the rates when you predict them correctly. Just as you promise to accept any losses to your account when you predict rate moves incorrectly.
Read up on CFDs contracts-for-difference or spread betting as used in the UK. These don’t exist in the USA for example so the other way people trade is with Futures contracts.
Hope this helps.
Okay, I heard my name called.
I’ll try not to get too technical here —
He who sells what isn’t his’n, buys it back or goes to prison.
That’s how a “natural-born” commodities trader explained short-selling to me the first time I asked,
“How can I [B]sell[/B] pork bellies, if I don’t [B]own[/B] any pork bellies?”
Told you clint was the man for the job lol
Cheers everyone!
Thanx to all you guys i now have a better understanding. Few different ways of looking at it, but all amounts to the same thing.
Great forum by the way. Gonna have alot more questions, i’m sure.
know i’m in the right place!