hi,
im very very new to this, can you help me to get the basics right.?
im confused with the following.
Lets assume im an Australian and I want to sell some of my AUD and buy GBP because i think the rate is really good right now and i think the AUD will drop in a couple of weeks against the GBP so i would sell and get my AUD back with profit.
Would my trade be AUD/GBP or GBP/AUD?
assuming its GBP/AUD “base” being the currency your buying (GBP)right?
then why am i quoted 1.6xxxx when i click BUY? should it not be 0.6xxx ?
i suspect im missing something very fundamental here. i have traded over the phone before via a broker and sold my GBP for AUD. for example the rate said:
deal 1 over the phone: GBP/AUD - 2.52 (this to me meant 2.52AUD for my 1GBP)
deal 2:over the phone GBP/AUD - 1.62 (this to me meant 1 GBP for my newly owned 1.62AUD) so i sold my AUD for GBP again showing a massive profit. so in short the exchange rate dropped and I got profit.
so i have 2 questions from the above, please confirm how the quotes work, and also why does everyone look for the rate to go up to show a profit on your position spot trade?
Im very confused and using a demo account but actually have no idea what im buying at present. Please help
hi. It doesnt matter that you are australian - you can trade any currency you like, you dont actually need to have money in that currency since you are basically borrowing one currency and investing that borrowed money in another. I suggest you go to the school of pipsology here, start at the very beginning and make sure you understand each part before moving to the next.
Unless you’re planning to travel, and need the pound in hand, you’re not really “buying” anything.
Think of it more as putting collateral up to carry a baton. Much like a relay race. You “buy” the rights to hold that baton long enough to let the difference in value between your chosen pair of currencies appreciate, or depreciate in value against each other, while you have it.
When you are done, you sell that baton off to the next trader in line with a waiting order, who then is optimistic that his sprint with it will pay off.
Now i get it, your loaning the trade with your margin.
when would you want it to depreciate in value against each other? can you give me an example. sorry, i will get there soon enough!
The quote is always GBP/AUD and never AUD/GBP. The stronger currency is always quoted first- that’s a fundamental rule. For example, it’s always
USD/JPY
EUR/USD, and
GBP/‘ANY OTHER CURRENCY’ (because GBP is the strongest of all).
Secondly, the first currency (called the BASE currency) is always the basis for your transaction. What I mean is, in your case for example- GBP/AUD- when you click “BUY”, you’re buying GBP and selling AUD simultaneously. When you click “SELL”, you are selling GBP and at the same time buying AUD.
So, if I think AUD is falling in value (relative to GBP), I’d sell my AUD (Click on “BUY” GBP/AUD) and when the value of AUD gets low enough, I then buy back the AUD (Click on “SELL” GBP/AUD).
…Get it?
PS: I advise you to go through the SCHOOL OF PIPSOLOGY on this website and you wont regret ever doing so. You’ll learn all the basics and have a good foundation. I think they’ll even advise you not to come around the forums (for your own good; or so as not to get carried away or get things mixed up) until you’ve got some good foundation. I wish you well.
Say you are trading the eur/usd. And you had reason to believe the euro was going to lose value against the dollar. You would “sell” the euro as your first transaction in the trade, to take advantage of it’s depreciating value. At your choice of exit point, you would then “buy” to cover your short.
Actually, the order of priorty in pairs is such that EUR is always the base currency. GBP is the next (always base except for EUR/GBP), with AUD after that (base for all except against EUR and GBP) , followed by NZD. Then it’s USD.