I am new to trading and going through pre school. (Know When to Buy or Sell a Currency Pair).
Under one of examples it says: If you believe that the U.S. economy is strong and the euro will weaken against the U.S. dollar, you would execute a SELL EUR/USD order.
By doing so, you have sold euros in the expectation that they will fall versus the US dollar.
so lets say i sell eur, now i have usd, but when do i sell them? by selling usd i get my eur back, so where is the “profit”?
or is it like this: i sell my usd and make some pips, and the pips i made is the profit?
may sound like simple math for you, but i suck at maths
Here are 3 posts from several years ago that address this question of “buying” and “selling” currencies. These 3 posts make similar points, but in slightly different ways, and with different examples. I hope they will clear up your confusion.
I get that you dont really “buy” the currency, but since you cant buy does that mean you cant hold it either? ex: eur/usd, i go long and usd drops, and i lose money, but is it possible to “hold” it there and go short when market is going bullish/up again, or do i need to place another trade for that?
i would think you cant hold since you dont own any, compared to a stock share.
The example you included in your question contains several problems, which I will address separately.
Regarding your main question:
I will answer it this way.
When you “buy” the EUR/USD (using the term “buy” loosely), you do not acquire anything. Therefore, there is nothing to “hold” in an ownership sense.
Rather, you take a position, which amounts to entering into a “contract” with your broker. Your contract states that you will earn a profit if EUR/USD rises above your entry price, and you will suffer a loss if EUR/USD drops below your entry price.
You can hold your EUR/USD position as long as you choose to, if your position is not generating a loss. If your position is generating a loss, then you can hold your position as long as you have sufficient funds in your account to cover that loss (in addition to required margin).
Regarding the example you included in your question:
If you go long EUR/USD, you will lose money if the EUR/USD pair drops – not if the USD drops.
The EUR/USD pair can decline in price in several ways:
the EUR currency can drop, while the USD remains stable
the EUR and the USD can both drop, with the EUR dropping more than the USD
the EUR can remain stable, while the USD gains strength
the EUR and the USD can both gain strength, with the USD gaining more than the EUR
As explained above, if you have enough money in your account to cover the loss (plus margin), then you can hold onto your losing position.
When the market (meaning the EUR/USD) is going up again, you would not go short. You would hold onto your LONG position, and recover your loss as the price continued up. An aggressive move would be to add to your LONG position.
You don’t need to place another trade, in order to hold onto your existing LONG position. If you want to add to your LONG position (the aggressive move described above), then that would involve placing another (LONG) trade.
As a forex trader, you’re not buying or selling anything, you’re placing a bet. The companies and commentators involved in trading don’t like it to be seen this way owing to cultural biases against gambling. But that’s what it is.
Happy to see that you thanked the folks who answered your question! Good job.
I see newbies here ask questions but just disappear once they get their answers. Glad you’re making the effort to show appreciation for other members who spend the time and effort to put in an answer to your question!
You must have to start with a demo account. It helps you to learn about the market by getting some knowledge and experience about it. You can also develop some qualities, skills and techniques without losing your money. At initial stage you can’t afford a loss.
practically the experience we get from demo , now works in a live account. so, instead of demo it is more appropriate to trade in a cent account for ensuing live experience.