Buying and Selling FX
The act of exchanging one currency for another. In forex, you always buy one currency while simultaneously selling another.
Every forex trade buys one currency and sells another at the same time, which is why currencies trade in pairs. You profit when the currency you bought strengthens against the one you sold.
Buying and selling FX is the core activity of the foreign exchange market. Every forex transaction involves simultaneously purchasing one currency and selling another, which is why currencies trade in pairs. When you buy EUR/USD, you are buying euros and selling US dollars. You profit if the currency you bought strengthens relative to the one you sold.
How It Works
- In EUR/USD, EUR is the base currency and USD is the quote currency
- Buying the pair (going long) = expecting the base currency to strengthen
- Selling the pair (going short) = expecting the base currency to weaken
- Trades execute at the bid (selling) or ask (buying) with the spread as the cost
Trading Tips
Always think in terms of the base currency. Buying EUR/USD means you are bullish on the euro.
You can profit in falling markets by selling a pair. Forex does not require prices to go up to make money.
Start with major pairs like EUR/USD or GBP/USD for the tightest spreads and deepest liquidity.
Buying and Selling FX Example
Say you click buy on GBP/JPY at 190.00. You just bought pounds and sold yen in one motion. If the pair rises to 191.00, your pounds buy back more yen: 100 pips of profit. Fall to 189.00 and the reverse bills you.
How Traders Use Buying and Selling FX
Always name both legs before clicking: what you own, what you owe. Beginners who think they bought something miss the short half, and the short half collects swap and trends against you all the same.
Related Terms
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