I’m completely new to the financial market and trading. Currently I’m going through the babypips school. One of the questions that came to mind goes as follows:
Lets say my account balance is 1000 EUR.
I want to invest it in the USD/JPY because I believe the USD will rise in value against the JPY.
Since my account balance is in EUR how does this work?
You don’t need to worry about this, it’s much simpler than you are thinking. You are not buying actual US Dollars using the proceeds of selling some actual Japanese Yen, which you have bought by selling actual euros from your account. What you are actually doing is betting on the increase in the exchange rate between the two currencies.
You are betting it will go up, and you are staking a certain amount of your capital in euros that you are right. If you are rght you will receive a number of euros in proportion to the size of your position: if you are wrong, you will likewise lose some euros to the broker who will use some of them to pay out to other clients who bet that the exchange rate would go down.