Hi, I have two questions:
1.- I always read that when you purchase eur/usd, you purchase the base currency and at the same time you sell the quote currency. Well I would like to understand why. I mean, imagine I open an account with a broker in euros and I deposit 100 euros, then I decide to open a position buying 100 euros. According to the theory I am selling 136 dollars, but I didn't have any dollar in my account. Where are those dollars coming from? I didn't have them, how is it possible that I sell something I don't own?
2.- And now, if the exchange rate moved to 1.50 and I sell my open position in eur/usd, What would happen? According to the theory when you sell eur/usd you are selling euros and buying dollars, but I started my account with 100 euros and now I am getting 150 dollars instead. Do I need to change the dollars I get from the sell into euros?
Thanks!
1.- I always read that when you purchase eur/usd, you purchase the base currency and at the same time you sell the quote currency. Well I would like to understand why. I mean, imagine I open an account with a broker in euros and I deposit 100 euros, then I decide to open a position buying 100 euros. According to the theory I am selling 136 dollars, but I didn't have any dollar in my account. Where are those dollars coming from? I didn't have them, how is it possible that I sell something I don't own?
2.- And now, if the exchange rate moved to 1.50 and I sell my open position in eur/usd, What would happen? According to the theory when you sell eur/usd you are selling euros and buying dollars, but I started my account with 100 euros and now I am getting 150 dollars instead. Do I need to change the dollars I get from the sell into euros?
Thanks!