So I’m learning trading, and i got to Type Of Forex Orders lesson ( cant post a link due to being a new user ) its at - /learn/forex/types-of-orders
Everything sounds pretty straight forward up to this :
"Let’s say that you’ve decided to short USD/JPY at 90.80, with a trailing stop of 20 pips.
This means that originally, your stop loss is at 91.00. If the price goes down and hits 90.60, your trailing stop would move down to 90.80 (or breakeven)."
Why would my stop LOSS be at 91.00? I’m selling USD to gain JPY, as you’re shorting the base currency so If im getting more JPY per USD unit wouldnt it mean that my stop LOSS is at 91.60 instead and when we move to 91.00 its put at 90.80?
You are not selling USD, and you are not buying JPY.
You are taking a speculative SHORT position on a “thing”, a currency pair, which happens to have two components, the USD and the JPY.
That thing, that currency pair, has a price which moves. And your speculation is on the direction of that price movement.
The pair initially has a price of 90.80 in the example you cited. Then the price of the pair changes, moving in the direction of your SHORT trade, and the trailing stop follows, pip for pip.
If the price of the pair moves down 10 pips, the trailing stop will move down 10 pips.
If the price of the pair moves down 20 pips, the trailing stop will move down 20 pips.
And so forth.
Despite what you will read and hear, there is no buying or selling of currencies in the retail forex market (our market). Your broker will not buy dollars from you, or sell yen to you. He will simply take your bet on the direction of the USD/JPY pair (or any other pair).
Most likely, you are now thinking —
“But, the School of Pipsology says that a LONG position means buying the base currency and selling the quote currency. And a SHORT position means selling the base currency and buying the quote currency.”
Sadly, the School of Pipsology is wrong about this.
If you learn nothing else from this conversation, please learn this:
There is no buying or selling of currencies in the retail forex market.