Really basic question about buy and sell orders
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Thread: Really basic question about buy and sell orders

  1. #1
    ResqwScg88
    Guest
    I understand buy orders - you buy XXX and await the price to go up - profit.

    I do not understand how market orders operate - how do you sell something you do not own? I'm having difficulty wrapping my mind around the idea.

  2. #2
    ResqwScg88
    Guest
    Quote Originally Posted by ;
    I think you're talking about'short sale'

    Borrowing a lot to sell from someone with a promise to buy it back afterwards. You'd expect to profit from selling high and buying back later for a profit.
    Thanks for the answer.

    So in this instance, are you borrowing from the broker or another trader, or does that depend on the sort of broker you use (ECN vs bucket shop)?

  3. #3
    Out of your broker I believe.

    I'm not sure the other details.

  4. #4
    Buy = make money when price goes up
    Sell = make money when price goes down.

  5. #5
    esndros2121
    Guest
    Quote Originally Posted by ;
    I know buy orders - you buy XXX and await the price to go up - profit.

    I don't know how market orders operate - how do you sell something you don't own? I am having trouble wrapping my mind around the thought.
    Every transaction (Buy or Sell) always involves a buy of one currency and a market of their other currency in the pair. Example:

    EUR/USD - EUR is the base currency for the pair and USD is the quote currency for this pair. Should you buy EUR (long EUR) you are simultaneously selling USD. The reverse is true is you are selling (short) the EUR.

  6. #6
    Thank you for asking this question. As someone quite new in the Forex planet I had been becoming very confused by the buy and sell.

    Thank you for clarifying!!

  7. #7
    I think you're talking about'short sale'

    Borrowing a lot to sell from someone with a promise to buy it back afterwards. You'd hope to profit from selling high and buying back after a profit.

  8. #8
    While it is true what was just said it is not really applicable. The consequence of selling eurusd is similar to buying usdeur except it does not exist so you're in effect selling something that you don't have. I heard it in this way.

    Imagine you had a friend (we'll call him bob) that'd just purchased the latest and best video game program a month before xmas as a gift for his children. He paid $1000 for it on ebay because that has been the going rate at the moment. You're pretty damn sure this could be gotten for the normal price in the shop for $300 before xmas. So what did you do? You asked bob if you could borrow it before xmas but you would return it in time for xmas. So that you took your freshly borrowed game program and sold it on Ebay for $1000 except that you owed one game program to bob. You're short a game system. That's where the word short comes from. Then in 2 weeks new systems came in stores and you purchased one for $300. You stated Hey Bob and went to bob. Thank you for letting me borrow also you game and this it. You just made $300. Now imagine that new systems never made it into stores. Demand increased as xmas got nearer. The Ebay prices went up to $2200. It had been 2 days b4 xmas and you had no choice and paid $2200. You just lost $1200. This is how short selling works and this is the way you win and lose. You might ask why anyone would do this? Well usually we're discussing banks that have what you want to borrow and will earn money off the short in interest or swap rates. I feel you will observe that shorts tend to have higher swaps than longs. I hope this helps.

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