I’m a preschooler in the School of Pipsology, and I’m trying to understand the mechanics of what actually happens when I make a trade, as well as some of the lingo.
Firstly, If I buy USD/CHF, I am effectively buying Dollars with Francs, but I didn’t deposit Francs into my margin account, so how did I do this?
Secondly, how do you verbalize pairs? For example, if you were on the phone telling your brother that you bought USD/CHF, how would you verbalize it?
Thanks Kindly,
Babatot
the joy of the computer age is none of that matters, as the computer “computes” the values and you make the trade — the exchange rate is figured in and thats what youre trading anyway, for lack of any thing else.
so your “dollars” are changed into whatever other currency you are trading, and its all done automatically by your brokers computers.
,[
A lot more to learn yet.
Rhodytrader is the expert on explaining the answer to the question you ask.
Basically your “margin” is a good faith deposit with your broker to protect him in case your trade backfires.
In your trade, money does not actually change hands, it is computer recorded, and if successful, profit is added to your account.
2 ways I suppose.
The US dollars, Swiss Francs pair - also called the “Swissy”
Speak out the letters one by one.
You are not just buying USD/CHF. You are thinking of it as one entity. It is a pair. (you should be thinking in pairs because it’s important to pay attention when one currencies value is better or worse than another) You are simultaneously buying USD and selling CHF (if buying the pair) The first in the pair is the base. If you are selling reverse it.
When you close you are doing the opposite of how you entered the trade. The exchange rate has (hopefully) gone in your favor. If you started buying USD, then when it goes up (hopefully) you sell it (close/hit TP point/hit postive SL) because it is now worth more than when you bought it.
Now to simplify things… right now just think, "If I hit buy I’m going long and want the pair to go up for profit. If I hit sell I’m going short and want the pair to go down to make a profit.
The technical mechanics of the trade are that you are borrowing Francs, converting them to Dollars, and depositing the Dollars. You are therefore paying interest on the Swiss and receiving interest on the Dollars.
[/QUOTE]Secondly, how do you verbalize pairs? For example, if you were on the phone telling your brother that you bought USD/CHF, how would you verbalize it?[/QUOTE]
AUD = Aussie
GBP = Sterling
EUR = Euro
USD = Dollar
CHF = Swiss
CAD = Canada
JPY = Yen
USD/CHF is therefore “Dollar-Swiss”. GBP/JPY is “Sterling-Yen”. Etc.