My introduction

[decoir]

Hi. I don't know if it's common for new members to introduce themselves here but I thought I should, seeing as I already started posting without doing so.

I'll keep it brief, and tell you a bit about me so that perhaps it can help you know who you're dealing with if you come to reply to a post of mine.

I'm in my 20's and a graduate in a subject unrelated to finance, and indeed my only education in this field was a year of economics at school when I was about 13.
I'm OK for money right now, and have a place to live, though I'm not free from pressure to work my way into a normal career. I don't require or expect forex trading, if I do ever go live with it, to make me a living within any short period of time.
I've only been learning about forex for about a week or so. I've been through the school of pipsology and played around on a couple of demo accounts (FXCM and FX Solutions) so I have at least a vague idea of what this whole thing is about. I can't fully get my head around even the most basic of systems just yet, though, and there's a few very fundamental issues that still are managing to evade my understanding.

Here's one: can someone explain how you can sell a currency that you don't yet own? If I have GBP, how is it that I can sell USD before even buying them? Through what process is that actualised?

Anyway, what I want to do soon, when I get to grips with any simple system, is just pick it up and trade with it on a demo account and hopefully by doing so I'll learn quite a bit about how the system is really working.

Thanks for reading. I'll get back to doing that myself, now. At this stage I'm not convinced that the whole thing isn't completely random and unwinnable, but I'm finding it very interesting.

Thanks

[johnnykanoo]

Welcome to babypips!!! You will find this a great and friendly place to learn. If you are willing to put in a little blood sweat and tears you too can be a success at forex.

Here's one: can someone explain how you can sell a currency that you don't yet own? If I have GBP, how is it that I can sell USD before even buying them? Through what process is that actualised?

To answer your question when you buy or sell in the forex you aren't really buying or selling. In fact you are either long or short the market, but ill keep it simple.

You are not "buying" You are agreeing to buy at a certain price, so if price goes up from where you agreed to buy you made money. If you sell you are really agreeing to sell at that price if the price goes down then the differenc e in price is what you made.

[decoir]

:'( That leaves me just as confused, haha

I can imagine how buying and then selling works, but not the selling and then buying... :?

[Sweet Pip]

I like to think of it this way:

For example, the pair is USD/CAD

When you buy the pair, it's like you are buying USD with borrowed CAD. If USD goes up against the CAD when you close, then you are repaying the CAD back with more USD than you started.

***(oops, revised)***
When you sell the pair, it's like you are borrowing USD to buy CAD. If USD goes down against the CAD when you close, then you repay the USD with more CAD than you started.

Hope that helps

[johnnykanoo]

:'( That leaves me just as confused, haha

ok lets pretend..... Say you go to oil man and you buy $10,000 in oil. Lets assume that there is no extra cost to you for storing and holding and or delivering this oil.

So you buy the oil for $10,000. You hold onto it for 1 year then you sell it for $12,000. You made $2000.

In forex you are buying a currency and holding it then selling it back.

Ok second example. You are the oil man and somebody comes to you and says hey buddy let me buy $10,000 worth of oil. So you sell him the oil. In a year he comes back and the oil is now only worth $8000. He sells you back the oil and you make $2000.

It is buying and selling to make money the only difference is in forex you never accually handle the "oil" You are therefore not buying or selling you are "agreeing" to buy or sell at that price. The oil man "agrees" to buy oil at $10,000 then when it goes up to $12,000. He never handles the oil he only agrees to handle it at that price. It is like a game really except it isn't a game at all. Think of the currency as "virtual" currency that you never acually handle.

I hope this helos a little

[decoir]

Originally Posted by johnnykanoo

ok lets pretend..... Say you go to oil man and you buy $10,000 in oil. Lets assume that there is no extra cost to you for storing and holding and or delivering this oil.

So you buy the oil for $10,000. You hold onto it for 1 year then you sell it for $12,000. You made $2000.

In forex you are buying a currency and holding it then selling it back.

Ok second example. You are the oil man and somebody comes to you and says hey buddy let me buy $10,000 worth of oil. So you sell him the oil. In a year he comes back and the oil is now only worth $8000. He sells you back the oil and you make $2000.

It is buying and selling to make money the only difference is in forex you never accually handle the "oil" You are therefore not buying or selling you are "agreeing" to buy or sell at that price. The oil man "agrees" to buy oil at $10,000 then when it goes up to $12,000. He never handles the oil he only agrees to handle it at that price. It is like a game really except it isn't a game at all. Think of the currency as "virtual" currency that you never acually handle.

I hope this helos a little

Sure, I understand that - but what about when someone tries to sell oil that he doesn't even have? If someone buys it, it's ok if the deal closes back with the same two people (because nothing need change hands), but what about if the buyer of the non-existant oil then moves the asset further along in some other direction?

I don't even know what I'm asking....

Basically if I have £10,000 how can I sell dollars, or euros, or anything other than pounds?

[Sweet Pip]

Originally Posted by decoir

Sure, I understand that - but what about when someone tries to sell oil that he doesn't even have? If someone buys it, it's ok if the deal closes back with the same two people (because nothing need change hands), but what about if the buyer of the non-existant oil then moves the asset further along in some other direction?

I don't even know what I'm asking....

Basically if I have £10,000 how can I sell dollars, or euros, or anything other than pounds?

LOL...It is hard at first to comprehend how you can sell something you don't have. However, your broker has access to dollars, euros, etc ...and you buy from, or borrow from, the broker.

Here's an investopedia definition of "Short Selling":

The sale of a borrowed security, commodity or currency with the expectation that the asset will fall in value.

For example, an investor who borrows shares of stock from a broker and sells them on the open market is said to have a short position in the stock. The investor must eventually return the borrowed stock by buying it back from the open market. If the stock falls in price, the investor buys it for less than he or she sold it, thus making a profit.

[decoir]

hmm, it's becoming more clear, yes.

I'm on GMT, so goodnight for now!

Thanks for the replies

[FXCaribbean]

Originally Posted by Sweet Pip

LOL...It is hard at first to comprehend how you can sell something you don't have. However, your broker has access to dollars, euros, etc ...and you buy from, or borrow from, the broker.

Here's an investopedia definition of "Short Selling":

Decoir,

You can also read that post.

[VulcanClassic]

Decoir,

I know, it's confusing. Don't even worry about it, you don't even need to know that stuff. Also, leverage - that one messed me up for awhile, when in the end, that's not even the question to ask. It's about the risk per trade, not the leverage.

Just learn long, short, bid, ask, spread, etc.

As you go you'll see, just stick with it.