Am I Really Buying Anything?

Sorry - I’ve gone through the school and I’ve been playing with some demo accounts using individual broker sites and the MetaTrader4 platform. It’s been fun, but I don’t think I’m near ready to use real money.

Anyway, one thing that I’ve been having trouble with is the concept of an open position. Let’s say I buy 100 EUR using an account with FXCM. FXCM says I have an open position and to close the position I need to sell 100 EUR through my FXCM account.

So, do I ever really have 100 EUR? Can I buy 100 EUR and just keep it under my mattress for a few years in case I ever visit Paris? And if I can’t, what am I actually doing when I buy 100 EUR?

No, you’re trading on the spot fx market, which does not involve physical currencies. They are called derivatives, which is a product which mirrors an actual physical financial asset - which in this case is the actual currency in question. What you, and we are all doing, is simply betting by speculating on the future monument of the spot fx market.

So when your broker says you have bought X, or sold Y, this is just a mechanism to illustrate a complete transaction from open to close.

Very good newbie question Rob. Hope you got the answer except that currencies are traded in pair, i.e. when you are buying EUR you are selling USD (EUR/USD) etc.

[B]Jezzode is correct.[/B]

[B]This is not correct.[/B]

In the retail forex market, currencies are [B]not[/B] bought or sold; currency pairs are [B]not[/B] bought or sold; and when someone says that you are buying the base currency and selling the cross currency (or vice versa), please ignore that statement — it is incorrect.

Maybe this will help — 301 Moved Permanently

Thanks, this makes a lot more sense now.

Sure clint, technically that is wrong. But we use the term in short,i.e.simplify.

Well, I think there is no need to try and understand whether you are buying one or selling the other, because it does not work like the physical market, where u buy when it is low and sell when it is high. Just know how to use the buy and Sell button.