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On the forex market we're trading currencies, swapping a currency for another. So we buy a currency wishing its value will grow compared to internet of the 1 we're selling. Yes, we, at the same time, investing in a currency and selling another currency. An example is a little more logical. We have dollars and like to purchase euros. The set traded here is EUR/USD, and also the exchange rate is one.25. You can read it like this : 1 euro means one.25 dollar. We hope that the euro value will be higher thus that later we'll purchase more money. The exchange rate increase to one.35, in this instance we bought 1 euro utilizing one.25 money, and it today means to one.35 money. So we exchange our 1 euro back in dollars and have one.35. We bought 1 euro for $one.25 and market it back for $one.35, we made a 10 cents profit. Naturally on the forex market you'll not purchase a particular euro, this is few hundreds or thousands, depending on your budget and also the leverage offered by the broker. Exchange rates are always mobile. Whenever I state that we "hope" internet will grow, several factors can be used to predict the pace, based on technical or fundamental analysis. This is not the topic of this particular article so let's have another illustration of a selling trade. We take the same set (EUR/USD) because above beginning with all the same exchange rate (one.25). We like to market euros thus we can get it later at a reduce price. Here we hope, or recognize that internet of the euro will depreciate. We sell 1 euro for $one.25. The exchange rate drops to one.15. That means that today we merely want one.15 to purchase our euro back. We exchange our dollars back in euros and again, make a 10 cents profit. When we buy or market, we always purchase or market the base currecy. The base currency is the initial one out of the set. In the set EUR/USD, the base currency is the euro and also the USD is named the quotation currency. When you decide to purchase, we buy euro and market dollars. Whenever you choose to market, we market euros and purchase dollars. Think that we always must exchange something 2 instances. If you decide to purchase something and like to make a profit from it, we would like to market it at a higher price. And so, in the event you are selling something that you'll need to purchase again, we would like to have it at a reduce price.
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