Hi All,
Im completely no knowledge about FX trading and now I am studying here on babypips.com.
I just have one question which I dont understand and I hope you can help me.
In the example"
- You believe that signals in the market are indicating that the British Pound will go up against the US dollar.
- You open one lot (100,000), buying with the British pound at 1% margin and wait for the exchange rate to climb. When you buy one lot (100,000) of GBP/USD at a price of 1.5000, you are buying 100,000 pounds, which is worth US$150,000 (100,000 units of GBP * 1.50 (exchange rate with USD)). If the margin requirement was 1%, then US$1500 would be set aside in your account to open up the trade (US$150,000 * 1%). You now control 100,000 pounds with US$1500. Your predictions come true and you decide to sell.
- You close the position at 1.5050. You earn 50 pips or about $500. (A pip is the smallest price movement available in a currency)."
On the bolded part I dont understand why I need to sell after I buy. Isnt it that when I think GBP will rise against USD, what I do is to hit “BUY” and when it reach a my target I have to close my order? Why on the example it says I have to sell? What I would sell?
Again it says"
You buy 100,000 pounds at the GBP/USD exchange rate of 1.5000. You blink for two seconds and the GBP/USD exchange rate rises to 1.5050 and you sell.You have earned a profit of $500.
I bought GBP, how do I sell what I just bought after I close my position? Do I need to buy first and then after reach the target, I have to sell again?
Please help me understand this part. Thanks!