confused with forex..

[Scotty2Cues]

If my broker account is in GBP and I buy the EUR/USD, the broker converts my GBP to USD before buying? When I sell, the USD is converted back into GBP and my account shows a profit or loss.

I assume my profit/loss is also determined by the GBP/USD market?

So would I need to pay attention to both markets?

Thanks

 

[Rhody Trader]

You never actually buy or sell anything when doing retail forex trades. It's like trading futures. You're entering into an agreement to make a future exchange, though because of roll-over that exchange never actually happens. Your margin is simply a surety against the fall in the value of your position. The only conversions which come about are on the profits or losses you make in positions not involving your account currency. That means if you're trading EUR/USD and make $100, the GBP/USD exchange rate will decide how many pounds profit you make.

 

[gc1]

I would say no, no and probably yes respectively.

Your account balance is only margin money, it's not getting converted.

And besides it's all "virtual" with most forex brokers anyway (you deposit in one currency and can withdraw only in that currency everything else is just accounting entries in a computer).

 

[Scotty2Cues]

That means if you're trading EUR/USD and make $100, the GBP/USD exchange rate will decide how many pounds profit you make.

but thats what I mean. So if I trade EUR/USD and my account is in GBP I have to also pay attention to the GBP/USD when converting the $100 back into GBP?

EG. Say my account is £1000 and I buy the EUR/USD using $100 and assume when I buy, £1 = $1. My account is now £900. After the trade assume I make $200 profit. But in the meantime, a crisis a whatever has happened and now £0.01 = $1. My $200 profit is now £2 and my original £100 is now worth £1? My account is now £903..

 

[Rhody Trader]

but thats what I mean. So if I trade EUR/USD and my account is in GBP I have to also pay attention to the GBP/USD when converting the $100 back into GBP?

EG. Say my account is £1000 and I buy the EUR/USD using $100 and assume when I buy, £1 = $1. My account is now £900. After the trade assume I make $200 profit. But in the meantime, a crisis a whatever has happened and now £0.01 = $1. My $200 profit is now £2 and my original £100 is now worth £1? My account is now £903..

No. You didn't read what I wrote correctly.

If you enter a EUR/USD trade using say £100 of your account for margin, that £100 is not converted to USD. It never leaves your account. The only time the GBP exchange rate comes into play is on the profits or losses you make.

So, let's combine your £100 margin with my earlier example of making $100 on your trade. When that trade closes the £100 in margin is released, so you're back to having £1000 in available funds. On top of that you add the $100 in profits. If GBP/USD is 2.0 then that's £50 and your total is £1050. If GBP/USD is 1.0 then it's £100 and your account balance is £1100. Of course if you lost $100, your account would be £950 and £900 respectively.

Get what I'm saying?

 

[Scotty2Cues]

No. You didn't read what I wrote correctly.

If you enter a EUR/USD trade using say £100 of your account for margin, that £100 is not converted to USD. It never leaves your account. The only time the GBP exchange rate comes into play is on the profits or losses you make.

So, let's combine your £100 margin with my earlier example of making $100 on your trade. When that trade closes the £100 in margin is released, so you're back to having £1000 in available funds. On top of that you add the $100 in profits. If GBP/USD is 2.0 then that's £50 and your total is £1050. If GBP/USD is 1.0 then it's £100 and your account balance is £1100. Of course if you lost $100, your account would be £950 and £900 respectively.

Get what I'm saying?

Thanks, think I get it.... but my profit is still determined by 2 markets - EUR/USD and GBP/USD ... do I get it?

 

[Rhody Trader]

Thanks, think I get it.... but my profit is still determined by 2 markets - EUR/USD and GBP/USD ... do I get it?

Only the final size of your gain or loss, not whether you win or lose.

 

[FXGroundworks]

No you wouldn’t need too. Most brokers have this “conversion” built into the spread depending on what your base currency is so that you wouldn’t have two separate transactions.

 

[pboyles]

No you wouldn’t need too. Most brokers have this “conversion” built into the spread depending on what your base currency is so that you wouldn’t have two separate transactions.

Spam

 

[jiggly]

If my broker account is in GBP and I buy the EUR/USD, the broker converts my GBP to USD before buying?

As another has already mentioned, you are not physically buying or selling currencies when trading with the majority of retail forex brokers, you are just speculating on the movement of the price.

being a little more practical.

Your GBP is converted to USD so you can sell them for euro's, yes.

 

[jiggly]

Thanks, think I get it.... but my profit is still determined by 2 markets - EUR/USD and GBP/USD ... do I get it?

when you sell your euros and buy back your USD to close your trade, how much profit you make or lose in GBP will be determined by the currect rate between the GBP/USD, yes.