Please explain a simple aspect...

[alih]

Hi some of you may recognize me from the stocks section of the forum. I've lost money and I've tried using ta/fundamental analysis and its not working. I've also tried paper trading on and off. I'm looking to switch to forex and so far i've been reading stuff at baby pips i understand candles and market hours, etc. I do not understand a simple aspect though... and that is this. EUR/USD now i know that i have to buy euros using usd. Now my question is lets say i wanna buy a euro do i pay 1 dollar or 1.345 whatever? Also i read on babypips:

EUR/USD
In this example Euro is the base currency and thus the “basis” for the buy/sell.

If you believe that the US economy will continue to weaken, which is bad for the US dollar, you would execute a BUY EUR/USD order. By doing so you have bought euros in the expectation that they will rise versus the US dollar.

If you believe that the US economy is strong and the euro will weaken against the US 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.

To me this makes no sense. In the first example it says the the us economy will weaken so you buy euros but dont you have to sell the euros to get back the usd and if the economy goes down then wont you lose money.... wtf? Please explain this simple aspect to me.

[wolf825]

Originally Posted by alih

Hi some of you may recognize me from the stocks section of the forum. I've lost money and I've tried using ta/fundamental analysis and its not working. I've also tried paper trading on and off. I'm looking to switch to forex and so far i've been reading stuff at baby pips i understand candles and market hours, etc. I do not understand a simple aspect though... and that is this. EUR/USD now i know that i have to buy euros using usd. Now my question is lets say i wanna buy a euro do i pay 1 dollar or 1.345 whatever? Also i read on babypips:

EUR/USD
In this example Euro is the base currency and thus the “basis” for the buy/sell.

If you believe that the US economy will continue to weaken, which is bad for the US dollar, you would execute a BUY EUR/USD order. By doing so you have bought euros in the expectation that they will rise versus the US dollar.

If you believe that the US economy is strong and the euro will weaken against the US 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.

To me this makes no sense. In the first example it says the the us economy will weaken so you buy euros but dont you have to sell the euros to get back the usd and if the economy goes down then wont you lose money.... wtf? Please explain this simple aspect to me.

Howdy...
In every Forex transaction there is a BUY but there is also a SELL that occurs as well. In EUR/USD for example--if you BUY Euro's you are at the same time Selling USD in the same transaction...if you SELL Euros you are BUYING USD in the same transaction. While you click only BUY or SELL for the Base currency--you are always doing the opposite with the counter currency.

So if you have your base currency--in EUR/USD, the EURO is your base currency...the USD is the Counter Currency--the currency comparative value to where the prices listed is based from. IF the EUR/USD is listed at 1.3456 that means that for every Euro it will cost you 1.3456 USDollars.. If the EUR/USD goes UP in price on Euro's to be 1.3500, that now means it costs you more USD to get that same Euro--and thus the Euro has strengthened over the USDollar... If the price of EUR/USD should drop to 1.2500, then you need less USDollars to gather more Euro's--meaning the USD is stronger.

So think of it this way--which would you prefer--paying 1.35 for a Euro dollar or paying 1.25 for a Euro dollar? Naturally if you pay less that is better and your money goes farther to buying more currency... Forex is sold in "Lots--which are fixed dollar value amounts of a currency based on the price when you buy/sell... The amount of that "Lot" does not change--if you buy a $100k Lot, it will always be 100k--only the value will change.. I did a description in another thread here for another member on how this works if you wish to look that up....


Hope this helps..any questions you may have while you investigate Forex---please feel free to post them and we'll do our best to help you out.

-w