Do I need $ and � to trade the EUR\USD in any direction?

Beginner Questions
1

Hi,
I have been studying Forex for 3 weeks now and have what probably is a very basic question.I live in Ireland so lets say my trading account has Euro in it.

Suppose I am trading the EUR\USD.I think the Euro will gain in value relative to the dollar so I decide to buy Euro.Do I need dollars to enter the trade in order to make a profit?Does my account have to have Euro and Dollars in it to start off with to enable me to trade in any direction?

Also what Exchange rate is used on Candlestick charts,is the rate midway between the spread?

Thanks for your help in advance!

3

It depends on your data source. Some do bid. Others do the mid.

4

Many thank to both of you for your quick responses!

I still don’t fully understand the process though.
So say I trade the EUR/USD and price is currently 1.3288/1.3294
I think the Euro will gain in price against the Dollar.So I want to buy Euro.I would
not buy Euro from a broker because I have Euro in my account.The broker would or I would not convert to Dollars then back to Euro at the same time so this is pointless!
So do I just sell my Euro when the Dollar does weaken?But then I would just want to immediately convert back to Euro,so how would I make a profit?
Again I appreciate the time you spend on answering this question and would really like a little illustrated example if possible!

5

The currency your account is denominated in has nothing to do with the actual trades you execute. It is merely an accounting measure.

To use your example, if you think the EUR is going to appreciate against the USD you would buy EUR/USD. In doing so you are effectively borrowing USD, converting it to EUR and having those EUR deposited. You pay interest on the USD loan and receive it on the EUR deposit. Note, you never actually take posession of the EUR. When close the trade - reversing all the aforementioned steps - you are left with a profit or loss. That amount is converted (if necessary) to your account base currency, then applied to your account balance.

6

Thank you that makes it a lot clearer to me!