I am a honest to god wet behind the ears noob here. I am trying to understand this concept…
I read this in babypips school-
In general, the exchange rate of a currency versus other currencies is a reflection of the condition of that country’s economy, compared to other countries’ economies.
Now when I execute a trade what exactly am I buying/selling here? I will add my thoughts to my question and please advise me. I think of this as buying/selling on the future of were the currency will be valued at in a point in time? And since this is done in pairs[I] ie euros/usd [/I]then this is where I get confused.
When EURUSD market at price level 1.3822 and you go long, you buy euro and pay with dollar. For example you buy 100 euros and pay 138.22 dollar. If price goes up to 1.3890, then you sell your euro. In this case you sell your 100 euro for 139,8 dollar. Your profit is 1,58 dollar.
I was not going to ‘get involved’ in your thread but, well, as usual, I cannot help myself.
Personal opinion (and no offence to BabyPips and, besides, I’ve been around long enough here for this comment to be ‘forgiven’ and ‘overlooked’):
I found that the BabyPips School, although MOST EXCELLENTLY designed and presented, makes on thing that making money in this business is a LOT more difficult than it need to be. It’s ‘information overload’ in my opinion.
I also believe that unless you’re some ‘natural’ (and there’s not TOO many of those around) and have been ‘born into this business’ and have a a good understanding of the various fundamentals: you’re wasting your time. If you’re a new trader you need to find a good mechanical trading system, FOLLOW IT, manage risk, and know certain basic things (like what are the different types of orders that can be placed and what they’re used for and you need to be familiar with your trading platform, or trading software, and a but of help and assistance from those that have ‘been there, done that, and got the t-shirts (losses)’ to prove it is always a bit of a help)!!! LOL!!!
Here is a post that I’ve just posted that may interest you and make things a bit simpler for you (I hope anyway):
As I noted at the end of THAT post: whichever direction you intend to take then I sincerely wish you good trading. It need NOT be difficult to make a living from trading (and a lot of us ‘old timers’ are ‘guilty’ of making it out to be so).
Thanks Dale for your response. Given the complexities of this type of trading and being new to this my first thoughts were to see what I was [I]thinking[/I] of getting into. So I opened the door and gasped , kinda like seeing the Grand Canyon for the first time. I may never make a real $$ trade with this but at least I can say I looked into it to see if it was a good fit. On the other hand maybe someday I might be able to say when somebody asked ’ what do you do for a living ’ I could say I am a currency trader But time will tell…
To be honest, I’m not entirely sure what’s going on behind the scenes. The EUR/USD is a product though, provided to you by the broker. It is like if they presented you this pair; Chicago Bulls/L.A. Lakers. Going long would indicate you believe the Bulls will be the stronger team, going short indicates you don’t.
So all the economics talk is more about assessing the teams. The way in which you actually engage with the various currencies is a separate mechanism. I could watch a chart and every time I felt the aussie dollar was going to get battered against other currencies, I could physically go get my aussie dollars from the bank and change them to another currency, and hence actually have the other currency. But that is far costlier than making a bet to the same amount with a broker.
hey man, you already answered his question, and he already read your answer. I’m trying to provide a different way of looking at it. if he wants an answer thats not “overcomplicate” he can stick with yours
I was thinking in answering something like that. Imagine you open a bank account in USD and you deposit 500 USD on it. Next day you open another bank acc but this time in euros, you have another 500 usd in cash and you deposit it into the eur acc. The bank will convert it into eur and charge you with spread and there you have it, you have your euros in a bank account. So next month you wanna make another deposit in your eur acc, no problem, the bank will do so but it will convert your dollars into eur with the new eur/usd value. You can pass funds from an acc to another and the bank will make the convertion at the actual eur/usd rate. So have you seen any euro? No, not a single, is just the makes that makes your money worth like it was euro. The only moment you will see an euro is when you witraw funds from your euro acc if euros are available if not the bank will give you the equivalent in usd at the rate of that moment. So that is how forex really works. Buying and selling real currencies takes time and is not quite cheap. Whe you open a position you buy a contract, not a currency, when you close it in loss someone else is buying it expecting it will continue to fall, and when you close it in gain, the same thing someone else is buying it expecting to continue to raise.