How currencies are traded?

As I read on several websites teaching forex, when we place an order, we buy and sell currencies at the same time. I just can’t understand why?

Click the School tab, its a great place to learn

basicly trading forex is same like another kind of trading,
for example you buy a bottle of beer at seven eleven or Wall Mart, i can say you just made a Beer/USD transaction. Sell your USD to buy a bottle of beer.
In forex it is same , one currency can act as " goods", and another one can acts as “money for the goods”

English is not my mother language and i afraid if i explain it for you, you dont get what i talking about
so you can read it at How currencies are traded in Forex? - Broker Arena if you wanna further explanation

In forex you are speculating on the relative value of one currency against another. It’s very similar to doing a spread trade in another market - for example going long corn and short wheat if you expect corn to appreciate relative to wheat.

In that case, here’s a question for you, Jon: when you buy a currency how do you expect to pay for it? (Or when you sell one, how do you want to be paid for what you’re selling?)

Not in the same currency, surely - that would be a waste of time and transaction-costs, wouldn’t it?

So the normal thing is to buy one currency and pay with another, or to sell one and be paid in another; otherwise what sort of “trade” would it be? :wink:

thank you it’s a great reservoir of knowledge

thank you for this information. In the link you sent, I understand that if Beer/USD = 1,5
I sell Beer I get 1,5 Dolar
I buy Beer I have to pay 1,5 Dolar
Does that mean: I sell Beer and buy Dolar or I buy Beer sell Dolar?
It’s a bit complicated

so when I go for long corn, i have to pay by wheat?

I like your explanation, it’s easy to understand.

I think it’s because when you buy a currency, you use other currency to pay for it
In return, you sell a currency and get other.

Of course not.

Spread trades in commodities are generally done in the futures market. You would go long the corn futures and short the wheat futures. Unless you hold through to delivery, you wouldn’t actually own anything. You would merely benefit (or be hurt) by the change in the price of corn relative to wheat.

It’s essentially the same in retail forex. You never own any currency aside from what you have on deposit in your account. You never convert one currency into another. You merely gain or lose by their change in relative values.

Here you are on the right website to learn everything you need to know. Just go through the Babypips school.

thank you for your anwser, but I’m afaird I don’t get it now…
I’ll go to Babypips school to figure it out.

We have to choose any currency pair for trading see its charts, market movement ant side either sell or buy this currency . Trader has to choose appropriate lot size and leverage according to its capital . Then monitor his trades to get proper profit .

Great contribution, thanks.

In my trades i will choose a currency pair that is having lower spreads. The reason is that since my trading is for less time i have to worry about the spreads also…

Yes School tab is the plac where we can go and solve our problem very easily. So always if you hae problem then you need to visit School tab here.

the more lower spreads (and commissions if apply ) more faster we reach BEP
that is why find the right broker for trader who believe “Spread does matter” are importan.

Major pair usually has low spread, but each broker might has different offer about spread fee, broker that offer low spread might more interested for scalping trader

In forex we trade currency using another currency which we call name as pair, like as eurusd we buy euro using dollar