Is there a point to going long on USD/XXX when the trend is down?

Beginner Questions
1

Hi. I’m new. I’m still in the school of pipsology and it’s awesome finding such good resources. If I get any terminology wrong please correct me!

So I was thinking about the basic of trade. If currency pairs are seen as commodities or merchandise, then it makes to buy them when their price is low and sell them when the price is high.

However, if my account has my equity in USD, and I see the USD/JPY or any other currency pair where USD is the base currency (speaking generally here) is there a point in buying USD/JPY when the price is low since I already have USD in my account and I’m just going to where I started (with some lost pips due to spread)?

2

That’s an often quoted illusion, “buy low/sell high”.

It is only correct when price is fixed, i.e. not likely to change in the foreseeable future.

In the market the opposite is true, price is only low/high in terms of what is likely up ahead.

1 Like
3

The school of pips doesn’t really make this too clear, BUT you are NOT “Buying Yens” or any such - All you are doing is betting on whether the price goes up or down. It matters not what currncy you are betting account holds - You are just making a bet !

4

I’m confused. When I’m selling USD/JPY aren’t I converting my money from dollars to yen?

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5

No as stated before you are not exchanging currency. Betting is a word… or investing I would use a bit more. But to make it simpler let’s go with betting.

You want to trade USD/JPY (or any currency pair). If you long the bet you are saying that the first currency pair (USD) will increase in value over the second pair (JPY) from the time the bet was placed (opposite of you short). No exchange of currency is made. Technically (although I don’t know how) you could bet someone 100 coughs in a jar that usd will be worth more than jpy at its current standing. You not trading coughs in a jar for money. Just using it as equity to bet with.

6

NO ! - You are looking at a dot - moving up and down on a screen !

All you are doing is betting whether it goes up - or down !

That’s it !

7

@ThePipSlayer, so here is the deal with USD base pairs (USD on the left) and USD quote pairs (USD on the right. Unless your inside your monitor looking out … You need to keep a watch on what $DXY or USDX is doing up or down because it is a very sensitive to what is happening in the financial world, especially for FOMC or when our President tweets. Either can move mountains of PIPS… Basically if the USDX is heading down the quote pairs are heading down also if the USDX is heading up the base USD pairs are heading up also.

How to Use the USDX for Forex Trading - BabyPips.com, thats it in a nut shell!

Peace & tranquility.

8

Well I think buying yen and buying usd/yen is two different thing.
Buying yen mean I am buying JPY 105 with the price $1, because I want spent some time in Tokyo.
Buying USD/JPY is the other way around.