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How an FX Trade Works
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| In this market you may buy or sell currencies. The objective is to earn a profit from your position. Placing a trade in the foreign exchange market is simple: the mechanics of a trade are virtually identical to those found in other markets, so the transition for many traders is often seamless. |
| Example of How FX Trade Works |
| Trader's Action |
Euros |
US Dollars |
| A trader purchases 10,000 euros in the beginning of 2001 when the EUR/USD rate was 0.9600. |
+10,000 |
-9,600 |
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| In May of 2003 the trader exchanges his 10,000 euro back into US dollar at the market rate of 1.1800. |
-10,000 |
+11,800 |
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| In this example, the trader earned a gross profit of $2,200. |
0 |
+2,200 |
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