Couldn't get your query completely but from what I understood my reply is as follows: -
When you sell / go short on EUR/USD pair - that means you are selling Euro in advance and will buy it back at lower price e.g.
Sold @ 1.2500 and after it down trended bought back @ 1.2400. This means you sold Euros to somebody at higher rate then the rate you bought at. The difference of 100 (2500 - 2400) is your profit. In Long applies vice-a-versa.
Also if base currency is gbp and we want to go long or short on a eur/usd trade how does that work? Do we borrow the eur from the broker?
Technically, your transaction never happens. Spot forex is a bid now, to buy the currency tomorrow. Tomorrow, you will roll over your option until the next day, which is why there are rollover charges for trades held longer than a day.
So, your trade never leaves the pound, but since the value of the EUR/USD has changed since your trade was opened, you pocket the difference, or give the loss to the broker. You never will own euros or dollars.
Thank you. How does that work on day trading ? So there are no rollovers for day trading? Sorry if I am asking stupid questions
Depends on when your brokers changes days. Say your broker uses GMT as time. If you open a trade at 0:01 AM, and close it at 23:59PM, there's no swap. But if you open it at 23:59PM, and close it at 0:01AM, those two minutes will cost you a rollover rate.