Hello highpitched,
Quote:
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"Currency USD/CAD, what am I buying exactly? US dollars, which I'm playing against CAD? What do I do if I think the CAD will go up? I didn't see any CAD/USD options in the platform I'm using (demo acct), so I assume my understanding of how this works is off entirely. Could you clear this up for me?"
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What has been said in relation to your question in previous posts is correct.
However another way of looking at it, which is especially true since in forex you work on margin, is that you are borrowing from a "bank" a certain amount of a currency, which you immediately lend to another "bank" in a second currency. When you "close" your trade, you effectively call you loan to one bank to repay the other, in the process benefitting (if you make a profit) from the relative movement of value between the two currencies. Should the movement go against you, you need make up the shortfall when "repaying" the original lender and that is you loss.
I let you workout which of the two currencies you are "borrowing" and which you are "lending". If you get that one right, you will probably never forget and you will have a good understanding of the fundamental mechanism of forex trading.
Cheers
MidGe