Placing a trade in the foreign exchange market is simple with today’s trading software. Furthermore, the mechanics of a trade are virtually identical to those found in other markets, so the transition for many traders is not difficult.
Example of How a Forex Trade Works
|Trader’s Action||Euros||US Dollars|
|A trader purchases 100,000 euros in March 2003 when the EUR/USD rate was 1.0750.||+100,000||-107,500|
|In May of 2003 the trader exchanges his 100,000 euro back into US dollar at the market rate of 1.1900.||-100,000||+119,000|
|In this example, the trader earned a gross profit of $11,500.||0||+11,500|