You can trade national currency of any country at global FOREX market. To be more precise, here you can exchange one currency to another according to some proportion. Such exchange proportion is called exchange rate. And the two currencies participating in such exchange are shown one by one and called the currency pair. Thus, FOREX trading can be performed for various currency pairs. E.g. euro-dollar (EURUSD), or pound-dollar (GBPUSD) etc.The objective of a trader (person who makes profit from forex trading) to exchange one currency to another at the lower rate, and than to perform the inverse operation at the higher rate (“buy low and sell high”).
The following example with EURUSD illustrates ho to perform the transaction and calculate its financial result:
Suppose, you have $1500 at your trading account. On August 20, 2008 after you carefully read analytics at our web site, we decided that EURUSD should go up. Upon the beginning of the up-move we bought euro at 1.4690. In approximately 14 hours after we made sure that we were right, but the further move in this direction according to analytics is unlikely, รณ sell euro at 1.4790. The margin is just 1 cent (1.4790−1.4690=0.01), what is not sufficient, but due to the provided to us “leverage”, we bought standard lot of 100,000 euros instead of 1 euro! And the profit is $1000 (100,000*1.4790 − 100,000*1.4690 = 1000)! Thus, significantly increased our capital within less than 14 hours.
Certainly not all the deals are that successful, and the analyst forecasts sometimes do not come true. But we get the instruments which help to limit the loss.
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