What is the difference between buying USDEUR compared to selling EURUSD?
What is the difference between buying USDEUR compared to selling EURUSD?
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curious · External communityPost link
External question — Personal Finance Stack Exchange
Author: curious
Original post: https://money.stackexchange.com/questions/81370
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To me, buying USDEUR looks the same as selling EURUSD. For those who have experience trading forex, are there circumstances when it makes more financial sense to buy USDEUR instead of sell EURUSD? Are these 2 actions always equivalent?
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not-nick · External communityPost link
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Author: not-nick
Original post: https://money.stackexchange.com/a/81371
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The two are not equivalent in terms of net P/L.
If you take a bullish view of the dollar against the euro, then there are reasons to buy USDEUR rather than sell EURUSD.
For example, suppose you buy USDEUR at 0.87 and sell it at 0.90. Then your profit is proportional to (0.90 - 0.87)/0.87 ; that's a profit of approximately 3.45% basis contract size.
On the other hand, if you take the same position by selling EURUSD at 1/0.87 and then buying back at 1/.90, then your profit is proportional to (1/.87-1/.9)/(1/.87) ; that's a profit of approximately 3.33% basis contract size.
And conversely, if you take a bearish view of the dollar against the euro, then buying EURUSD makes more sense.
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Quoted from Forex.com.bd-Editorial External answer — Personal Finance Stack Exchange Author: not-nick Source score (net votes, not local likes): 2 Original post: https://money.stackexchange.com/a/81371 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. The two are not equivalent in terms of net P/L. If you take a bullish view of the dollar against the euro, then there are reasons to buy USDEUR rather than sell EURUSD. For example, suppose you buy USDEUR at 0.87 and sell it at 0.90. Then your profit is proportional to (0.90 - 0.87)/0.87 ; that's a profit of approximately 3.45% basis contract size. On the other hand, if you take the same position by selling EURUSD at 1/0.87 and then buying back at 1/.90, then your profit is proportional to (1/.87-1/.9)/(1/.87) ; that's a profit of approximately 3.33% basis contract size. And conversely, if you take a bearish view of the dollar against the euro, then buying EURUSD makes more sense.
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