What are traded in currency trading?
Ok so I just trading currency and have a conceptual problem with the process. Say that I have 10,000 dollars in the account and buy one lot of EUR/USD pair, does that mean I spend money buying the Euros or I spend money buying the symbol EUR/USD like a security?
Thanks a lot the pros
Related posts:
First thing don’t put $10,000 down on a pair it is to levered you could loose thousands really quick.
Second go to a forex broker’s site and open up a paper trading account, you need some practice.
You are pairs trading so the EUR/USD is a contract. You look at a chart and try to predict the future movement of the pair. ( you can’t just guess)
If you think it is going up you go to your platform click on EUR/USD and click buy, if you think its going down click on sell. You seem to have the right idea that your buying it like a security but remember you can easily short(sell) it as well as buy it.
After about about 6 months of paper trading you will be ready for the real thing.
If you buy 1 lot of EURUSD. This means you will be selling dollars and buying 100,000 euros. As you only have 10,000 dollars, your broker will lend you the money and will deduct a percentage of your account as margin.
When you sell 1 lot of EURUSD, you will be selling 100,000 euros and buying back the dollars. The broker will then return your margin plus / minus the difference in the exchange rates.
For example
You buy one lot of EURUSD at 1.4968. This means that you buy 100,000 euros and sell 149,680 dollars.
Your margin will be deducted from your account (dependant on leverage).
The currency rate then goes up to 1.4988 and you then sell the euros and buy back the dollars. For 100,000 euros you will now get 149880 dollars. You give back to the broker 149,680 and they give you your margin back. And you keep the difference So you have made 200 dollars.