Chapter 2 - How buying and selling occurs in the Forex market
Profit and Loss in the Forex Market
It is no longer mysterious after the collection of previous articles, as it has become easier for you, dear reader, to know how the loss is realized and how the gain is achieved from trading in the currency exchange.
How to make a profit
Simply, profit is achieved when the market moves in the direction of your deal.
Suppose that the price of the British Pound is currently 1.3200, and you have the conviction that the price of the British Pound will decline in the coming days, so you sold a lot of British Pounds at the price of 1.3200, and then the market started moving in the direction of your deal, and indeed the price of the British Pound reached the level of 1.3080, and at this price, you decided to close your deal.
By doing this, you made a profit of 120 pips from the sale of the British Pounds.
Suppose that the price of the Euro is now 1.1000, and you have a conviction that the Euro price will rise, you made a deal to buy the Euro at the market price, and the prices started moving towards your deal, then you closed your deal at the price of 1.1090.
This means that you have made a profit of 90 pips from buying the Euro.
How the loss is realized
The loss is realized when the market moves in the opposite direction of your position.
Suppose you decide to sell the US Dollar against the Japanese Yen at the market price USD / JPY = 109.10, and the pair price started moving upward until it reached the level of 109.90, so you decided to close the deal to this extent.
This means that you have lost 80 pips from selling the US Dollar against the Yen.
You bought the US Dollar against the Franc at the price of USD / CHF = 0.9660, then was surprised by the strength of the Franc, which succeeded in rising against the US Dollar until the price of the pair reached 0.9620.
This means that you earned a loss of 40 pips from your purchase of the US Dollar against the Franc.