codekiddy
Newbie
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Hello,
Let's assume I have an account that is based on euros, ie. I have 10 000€ balance in my forex trader platform. And I want to buy US dollars vs. japanese yen. that is USD/JPY pair.
According to forex definition which says for currency pair that "currencies are exchanged for each other simultaneously", in order to buy dollars (USD/JPY) I need yen right?
But my account is in Euros so upon taking long position to buy USD/JPY my account balance which is in euros will be charged to buy yen first, then those yens will be used to buy dollars? Is that correct?
let's suppose it's not and my Euro account balance is charged directly to buy dollars without purchasing yen first, that is to buy dollars with my euros against the yen.
please explain which one of these two statements is true and why the other statement is false if so?
Also the same case as above, let say I want to buy yen against the dollar instead (vice-versa), then I suppose procedure will be to (automatically)buy dollars first and then these dollars will be used to buy yen for dollars in order for position to be open, right?
If you have read carefully you noticed that upon taking a position there are *TWO* currency conversions to take position, and *TWO* currency conversions to close it, that is there are made 4 currency conversions in total for one single position.
Now let's assume you managed to profit from this trade 10€ and your balance is now supposed to be 10 010€.
well this is absolutely not true, because there is a risk that in mean time while your trade is open, dollar lose it's value vs euro, so when dollars are exchanged back to euros during position closing you may lose some profit.
Any comments about this issue are welcome!
Let's assume I have an account that is based on euros, ie. I have 10 000€ balance in my forex trader platform. And I want to buy US dollars vs. japanese yen. that is USD/JPY pair.
According to forex definition which says for currency pair that "currencies are exchanged for each other simultaneously", in order to buy dollars (USD/JPY) I need yen right?
But my account is in Euros so upon taking long position to buy USD/JPY my account balance which is in euros will be charged to buy yen first, then those yens will be used to buy dollars? Is that correct?
let's suppose it's not and my Euro account balance is charged directly to buy dollars without purchasing yen first, that is to buy dollars with my euros against the yen.
please explain which one of these two statements is true and why the other statement is false if so?
Also the same case as above, let say I want to buy yen against the dollar instead (vice-versa), then I suppose procedure will be to (automatically)buy dollars first and then these dollars will be used to buy yen for dollars in order for position to be open, right?
If you have read carefully you noticed that upon taking a position there are *TWO* currency conversions to take position, and *TWO* currency conversions to close it, that is there are made 4 currency conversions in total for one single position.
Now let's assume you managed to profit from this trade 10€ and your balance is now supposed to be 10 010€.
well this is absolutely not true, because there is a risk that in mean time while your trade is open, dollar lose it's value vs euro, so when dollars are exchanged back to euros during position closing you may lose some profit.
Any comments about this issue are welcome!