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When I "buy" 100 SEK worth of USD/RUB, I am actually lending 100 RUB from the market, selling it immediately for 100 USD, then when the price of USD/RUB goes up 10% to 110 USD/RUB I sell my 100 USD getting 110 RUB. I then return the 100 RUB to the lender, keeping 10 RUB. I then sell the 10 RUB for SEK, keeping 10/(1.1SEK/RUB) = 9.09 SEK, for a total profit of 9.09%, despite the USD/RUB, SEK/RUB actually having increased 10%. It would also mean that it is better were you can to trade directly in the currency pair you have, SEK/RUB rather than USD/RUB if your account is in SEK. Then you would have made 10% rather than 9.09% without any additional costs of transactions. ( I find this a bit puzzling though, need to think about this. )

This is the way people normally seem to explain it, that you are buying USD. But you are obviously not buying USD when "buying" USD/RUB as if you were "buying" a stock. You are lending RUB, selling it and returning it later.

When I "buy" 100 SEK worth of USD/RUB, I am actually lending 100 RUB from the market, selling it immediately for 100 USD, then when the price of USD/RUB goes up 10%, to 110 RUB I sell my 100 USD getting 110 RUB. I then return the 100 RUB to the lender, keeping 10 RUB. I then sell the 10 RUB for SEK, keeping 10/(1.1SEK/RUB) = 9.09 SEK, for a total profit of 9.09%, despite the USD/RUB, SEK/RUB actually having increased 10%. It would also mean that it is better were you can to trade directly in the currency pair you have, SEK/RUB rather than USD/RUB if your account is in SEK. Then you would have made 10% rather than 9.09% without any additional costs of transactions. ( I find this a bit puzzling though, need to think about this. )

This scenario is kind of strange because you are lending 100 RUB, then selling it for 100 USD, meaning that you could also just be lending 100 USD directly, or buying actual 100 USD, omitting the lender, but then we would end up in Mechanism A) again. The lender is needed, so you are never actually buying any currency. You are lending the other currency pair, and buying USD.

This is the way people normally seem to explain it, that you are buying USD. But you are obviously not buying USD when "buying" USD/RUB as if you were "buying" a stock. You are lending RUB, selling it for USD, selling the USD later and returning the original RUB.

If I buy 100 SEK in the USD/RUB currency pair, my prior understanding was that I am actually buying 100 USD. My 100 SEK are therefore first exchanged for 100 USD. When the value of the USD/RUB over the next period goes up 10%. I sell my 100 USD. But what do I then sell it for?

1. Do I get RUB? Ok, my 100 USD now gets me 110 RUB.

2. Do I get SEK? Ok, my 100 USD now gets me 100 SEK, so that scenario is out.

Then now, we continue with 1). When my 110 RUB are exchanged back for SEK, I should get 110 RUB/(1.1SEK/1RUB) = 100 SEK. Therefore I did not make any money on the shorting of RUB through USD/RUB. Despite the RUB loosing value against the USD! But this can't be true. So how does the underlying mechanism work? My understanding is, and the above example shows, is that it doesn't matter if you buy USD/RUB or USD/SEK currency pairs, since what you are buying is essentially USD in both cases.

But I don't believe this scenario is correct. What is then the correct underlying mechanisms to facilitate a transaction where you can make money on the shorting of the RUB, or as I have been thinking, the increase of value of USD versus the RUB. I used to think that I am buying USD, so it doesn't matter what currency pair, USD/RUB or USD/SEK. But I am now getting a different undestanding.

My second possible scenario for how this goes is like this:

When I "buy" 100 SEK worth of USD/RUB, I am actually lending 100 RUB from the market, selling it immediately for 100 USD, then when the price of USD/RUB goes up 10% to 110 USD/RUB I sell my 100 USD getting 110 RUB. I then return the 100 RUB to the lender, keeping 10 RUB. I then sell the 10 RUB for SEK, keeping 10/(1.1SEK/RUB) = 9.09 SEK, for a total profit of 9.09%, despite the USD/RUB, SEK/RUB actually having decreased 10%. It would also mean that it is better were you can to trade directly in the currency pair you have, SEK/RUB rather than USD/RUB if your account is in SEK. Then you would have made 10% rather than 9.09% without any additional costs of transactions. (I find this a bit puzzling though, need to think about this. )

Note that I am kind answering the question as I formulate it, which is something I had difficulties to formulate to myself earlier. It pays to write questions and try to explain them :)

This is the way people normally seem to explain it, that you are buying USD. But you are obviously not buying USD when "buying" USD/RUB as if you were "buying" a stock. You are lending RUB, selling it and returning it alter.

When you buy a stock you are actually buying it. When you are shorting it you enter the lending mechanisms.

If I buy 100 SEK in the USD/RUB currency pair, my prior understanding was that I am actually buying 100 USD. My 100 SEK are therefore first exchanged for 100 USD. When the value of the USD/RUB over the next period goes up 10%. I sell my 100 USD. But what do I then sell it for?

1. Do I get RUB? Ok, my 100 USD now gets me 110 RUB.

2. Do I get SEK? Ok, my 100 USD now gets me 100 SEK, so that scenario is out.

Then now, we continue with 1). When my 110 RUB are exchanged back for SEK, I should get 110 RUB/(1.1SEK/1RUB) = 100 SEK. Therefore I did not make any money on the shorting of RUB through USD/RUB. Despite the RUB loosing value against the USD! But this can't be true. So how does the underlying mechanism work? My understanding is, and the above example shows, that it doesn't matter if you buy USD/RUB or USD/SEK currency pairs, since what you are buying is essentially USD in both cases.

But I don't believe this scenario is correct. What is then the correct underlying mechanisms to facilitate a transaction where you can make money on shorting the RUB, or as I have been thinking, the increase of value of USD versus the RUB. I used to think that I am buying USD, so it doesn't matter what currency pair, USD/RUB or USD/SEK. But as I write this question now, I am getting a different understanding.

My second possible scenario for how this might go is this:

When I "buy" 100 SEK worth of USD/RUB, I am actually lending 100 RUB from the market, selling it immediately for 100 USD, then when the price of USD/RUB goes up 10% to 110 USD/RUB I sell my 100 USD getting 110 RUB. I then return the 100 RUB to the lender, keeping 10 RUB. I then sell the 10 RUB for SEK, keeping 10/(1.1SEK/RUB) = 9.09 SEK, for a total profit of 9.09%, despite the USD/RUB, SEK/RUB actually having increased 10%. It would also mean that it is better were you can to trade directly in the currency pair you have, SEK/RUB rather than USD/RUB if your account is in SEK. Then you would have made 10% rather than 9.09% without any additional costs of transactions. ( I find this a bit puzzling though, need to think about this. )

Note that I am kind answering the question as I formulate it, which is something I had difficulties doing for myself earlier. It pays to write questions and try to explain them :)

This is the way people normally seem to explain it, that you are buying USD. But you are obviously not buying USD when "buying" USD/RUB as if you were "buying" a stock. You are lending RUB, selling it and returning it later.

When you buy a stock, you are indeed buying it. Possibly not even so in CFD' markets? When you are shorting a stock, you enter the lending mechanisms.

If we for instance scroll back time four months back, to before the loss of value of the RUB(RUBLE).

Say that I wanted to make money on the loss of value of the RUB(ruble) then with my forex account being based on SEK.

What I am wondering is this, what is the difference in the amount of money I make if, we say that USD/RUB and SEK/RUB both will increase 10% over the next period, also meaning that the USD/SEK will increase/decrease 0% against one and other.

Lets also assume that all currency pairs have a 1:1 initial ratio.

If I buy 100 SEK worth of USD/RUB currency pair, that is to my prior understanding, that I am buying 100 USD. My 100 SEK are therefore first exchanged for 100 USD. When the value of the USD/RUB over the next period goes up 10%. I sell my 100 USD. But what do I initially sell it for?

1. Do I get RUB? Ok, my 100 USD now gets me 110 RUB.

2. Do I get SEK? Ok, my 100 USD now gets me 100 SEK, so that scenario is out.

Then now, we continue with 1). When my 110 RUB are exchanged back for SEK, I should get 110 RUB/(1.1SEK/1RUB) = 100 SEK. Therefore I did not make any money on the shorting of the RUB through USD/RUB. Despite the RUB loosing value against the USD! But this can't be true. So how does the underlying mechanism work? My understanding is, and the above example shows, is that it doesn't matter if you buy USD/RUB or USD/SEK currency pairs, since what you are buying is essentially USD in both cases.

But I don't believe this scenario is correct. What is the correct underlying mechanisms to facilitate a transaction where you can make money on the shorting of the RUB, or as I have been thinking, the increase of value of USD versus the RUB. I used to think that I am buying USD, so it doesn't matter what currency pair, USD/RUB or USD/SEK.

If we for instance go back in time four months, to before the beginning of value loss the RUB(RUBLE).

Say that I wanted to make money on the loss of value of the RUB, with my Forex account being based on SEK.

What I am confused about is this, what is the difference in the amount of money I make, if, we assume that USD/RUB and SEK/RUB will both increase 10% over the next time period, which also means that the USD/SEK will increase/decrease 0% against one and other.

Lets also assume that all currency pairs have an initial 1:1 ratio. 100 SEK = 100 USD = 100 RUB.

If I buy 100 SEK in the USD/RUB currency pair, my prior understanding was that I am actually buying 100 USD. My 100 SEK are therefore first exchanged for 100 USD. When the value of the USD/RUB over the next period goes up 10%. I sell my 100 USD. But what do I then sell it for?

1. Do I get RUB? Ok, my 100 USD now gets me 110 RUB.

2. Do I get SEK? Ok, my 100 USD now gets me 100 SEK, so that scenario is out.

Then now, we continue with 1). When my 110 RUB are exchanged back for SEK, I should get 110 RUB/(1.1SEK/1RUB) = 100 SEK. Therefore I did not make any money on the shorting of RUB through USD/RUB. Despite the RUB loosing value against the USD! But this can't be true. So how does the underlying mechanism work? My understanding is, and the above example shows, is that it doesn't matter if you buy USD/RUB or USD/SEK currency pairs, since what you are buying is essentially USD in both cases.

But I don't believe this scenario is correct. What is then the correct underlying mechanisms to facilitate a transaction where you can make money on the shorting of the RUB, or as I have been thinking, the increase of value of USD versus the RUB. I used to think that I am buying USD, so it doesn't matter what currency pair, USD/RUB or USD/SEK. But I am now getting a different undestanding.