How FX Trading works
Forexmax use a combination of experience and trend based analysis to try and pre-empt a movement between two currencies. In effect we swap one currency for another in the belief that the market will move and prices change such that we benefit from the fluctuation.
Firstly we chose a currency pair to trade, then establish the base currency, and finally, decide whether to buy or sell the pair, also known as long or short.
We believe that the US$ will appreciate against the £.
Current price for GBP/USD - $1.50
We Sell the £ and Buy (long) the USD.
Having invested £100,000 we are now the virtual holder of $150,000. We were right and the $ does indeed strengthen to a rate of $1.45, therefore we now only need $1.45 to buy back each £1.
Now our $150,000 is in fact worth £103,448 so we decide to close the position, in effect buying back GBP and realising a gain of £3,448. We must of course take into account any market spread however these are universally tight and will generally have a limited effect on gains.