Forex Transaction Basics

Forex transactions involve two currencies. One currency is purchased while the other is sold. Watch this video to learn more.

Forex transactions involve two currencies, one currency is purchased while the other is sold. Consider the EUR/USD currency pair. If you bought this pair, you would be buying euros and selling dollars. If you sold this pair, you would be selling euros and buying dollars. As more traders buy the EUR/USD pair, the value of the euro strengthens relative to the dollar, and the exchange rate increases. Likewise, when more traders sell the EUR/USD, the value of the euro weakens relative to the dollar and the exchange rate decreases.

Forex traders attempt to predict future exchange rate movements in order to profit as the exchange rate moves in their favor. Let's look at an example. At this time, the EUR/USD pair is trading at 1.4088. If a trader anticipates that the exchange rate will increase, they can buy the EUR/USD pair. If the rate increases, the trader can close this trade by selling back the EUR/USD pair at a higher price, making a profit. In this case, a profit of three pips. However, if the trader had bought the pair at 1.4088 but closed this trade at a lower price, the trader would make a loss. In this case, a loss of three pips.

FXCM clients can buy and sell various currencies through the FX Trading Station and other platforms 24 hours a day, five days a week, with access to live executable prices and real-time streaming charts. FXCM clients have exceptional access to the forex markets.

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