Here we came to the third article. In previous articles I have taught you what Forex is and what the currencies that used in the financial markets are. Those who didn’t read previous articles you can go through that Lessons and articles in order. If not you cannot understand anything. Many people ask me how to make money from this. I will make a small explanation. At the end of this article you will find the answer for that question. You may remember that I told you about what are the currencies traded in the Forex market in previous article. Now, in this article we are looking at how we can make a profit from these currencies.

We will illustrate with a simple example

Let me start with a small example to illustrate this. Suppose you have a clothing store. Right now you can think of how to make a profit by selling clothes from this business. If you want to make a profit you have to buy these clothes from someone else at a low price. Then you have to sell for more than you bought. That means if you buy a dress for 50 Dollars and you have to sell these clothes for 55 Dollars. Then your profit is 5 Dollars.

$ 55 – $ 50 = $ 5

Now you can understand, this is what we do with Forex. The difference in Forex is that we deal with money, which means we buy and sell money. I will explain it further. I have shown you an image below of how we find the currency pairs that we talked about in the previous article in the Forex market. Look at that picture. There are a lot of currency pairs. But all are no applicable to us. Let me tell you about the currency pair EUR / USD.

To Understand Through out the Software

In the above section which shows the currencies of the software that we trade in the Forex market. We will talk about this software in future articles. Take a look at the picture. There are our currencies and then there are two things that called Bid and Ask and some other numbers. Let me first explain what these are.

 Let’s take EUR / USD. The numbers in front of it means how many USD that you need to buy a EUR.  Here, Bid (Sell) means buying USD and Ask (Buy) means buying EUR. In fact, instead of Bid and Ask, we can use Sell and Buy. Because when we make a transaction in the software, we can see that it is Sell and Buy. Numbers are showing that the selling price of the each currencies. Don’t be afraid, it becomes clear when I give examples to those who can’t understand.

We will talk about the example with the picture above.

How to make a profit when prices go up

We will talk about the example with the picture above.

As I said you before in above example have mentioned the value of USD that we need to get EUR. This changes in every second. Let us now assume that the value of the EUR will increase further. If we buy the EUR at the current market price, we can sell it when the price is high.

If we do a buy trade, the price we have is 1.2169. As this is a software; only we have to do is click on the buy icon. Then our money automatically decreases and a trade falls. Now if we want to make a profit, this price has to go higher than the price we bought. Suppose after a few minutes the price goes up to 1.2209 then we can conclude this transaction. When we close the transaction it means we are selling the money we bought. Now when we sell this money we don’t have to look for buyers. All we have to do is close the transaction and then the transaction will automatically close and the profit will be added to our account. Now let’s see how much our profit is.

1.2209 – 1.2169 = 40

Now you can see we have got a profit of 40 units. This profit is calculated by cash is depend on value of the transaction we make. Let’s take a look at that too. If you make a Lot 0.05 deal $ 0.5 x 40 = $ 20 that means you can make a profit of 20 Dollars per transaction. I showed you the little profit to know. I will explain what this lot is and how to calculate the profit separately in the previous articles.

This image shows how the USD depreciates as the EUR rises and falls.

How to make a profit when prices go down?

Now let’s see how we can make a profit when prices go down. You have a problem now. Now let’s see how we can make a profit when prices go down. You have a problem now with how this happens. Do you understand what happens when prices go up? Also, the lower the price, the lower the USD value of the EUR. In fact, it means the dollar is going up.

We think the EUR will be a little lower than the current price so all we have to do is place a sell trade. The price we need to place a sell trade is 1.2167. When we click the sell button the trade falls. Now we can make a profit only if the market price is lower than the price at which we traded. Suppose after a few minutes the price drops to 1.2137. Then we can close our transaction (remember we do not have a mandatory value to complete the transaction. We can finish at any time.) Let us now see how our profit is.

1.2167 – 1.2137 = 30

Now we have a profit of 30 units. This profit is calculated by cash is depend on value of the transaction we make.

Look at the image above, it shows how the EUR goes down as the USD goes up. That’s why we were able to make a profit when the USD went up.

We will talk about this again in the future. So don’t be afraid that some things are about not understood. Once you start training accounts you will simply understand these. But we wanted to discuss this because we need to go into the accounts with some understanding. Those who have problems can contact me through Facebook. Let’s meet up in the next article.

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