Buying and Selling Simultaneously

The biggest mental hurdle facing newcomers to currencies,
especially traders familiar with other markets, is getting their
head around the idea that each currency trade consists of a
simultaneous purchase and sale. In the stock market, for
instance, if you buy 100 shares of Google, you own 100 shares
and hope to see the price go up. When you want to exit that
position, you simply sell what you bought earlier. Easy, right?
But in currencies, the purchase of one currency involves the
simultaneous sale of another currency. This is the exchange in
foreign exchange. To put it another way, if you’re looking for
the dollar to go higher, the question is “Higher against what?”

The answer is another currency. In relative terms, if the dollar
goes up against another currency, that other currency also
has gone down against the dollar. To think of it in stock-
market terms, when you buy a stock, you’re selling cash, and
when you sell a stock, you’re buying cash.