NoaFX Tutorial

2.4 How does selling a currency pair work?

When you sell a currency pair, you are speculating that the base currency will fall in value against the counter currency. Naturally, when this pair drops in value, you will exit the trade and pocket the profits made.

Selling a Currency Pair

For example, if you are to sell EUR/USD, which is selling the EUR against the USD, you are expecting that the Euro will fall in value against the US Dollar.

  • You sell 10,000 contracts of EUR/USD at 1.3500
  • In expectation of this contract value to increase, you went short.
  • The currency pair's value decreases from 1.3500 to 1.3450, which is a 50 pips price increase. This change in price could be due to;
    • The relative value of the Euro currency has dropped against the US Dollar currency.
    • The relative value of the US Dollar currency has gained against the value of the Euro currency.
    • The relative value of Euro currency and the US Dollar are both increasing at the same time, but the rate of change is slightly faster for the Dollar than for the Euro.
    • The relative value of the Euro currency and the US Dollar are both decreasing at the same time, but the rate of change is slightly faster for the Euro than for the US Dollar.
  • Therefore, having made a 50 pips profit, you close your trades.
    Profit made is 50 pips, which is approximately 50 x $1.00 (price per pip) = $50.00

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