Forex Trading Example

The Forex market is build from billions of trades on a daily basis. A trade includes the buying of a currency and selling of another currency. Let’s pretend that a trader believes that the EUR will raise value against the USD. And let’s keep pretending that he has asked for the EUR- USD (opened a position) when it was traded at 1.4102 for 10.000. The trader has bid (closed the position) at 1.4122. In this trade there was a movement of 0.0020 or 20 pips, and due to the fact that every pip is worth 1€, this trader made a profit of 20€ on this trade. On the other hand the trader also has the opportunity to short sell (bid first) a currency pair if he believes that the base currency will decrease in value. For example if the trader has asked EUR- USD at 1.4122 for 5k and has bid at 1.4102 he has lost 20 pips=20€.

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