Let's think about shopping first. If you buy anything (it can be almost anything... House, jewellery or stock, and it appreciates.
If you sell at this point, you can make a profit. The difference between the value of your initial payment and the value of your present value.
Currency transactions are the same way.
Suppose you want to buy AUDUS dollar currency pairs.
If the Australian dollar appreciates against the dollar and then sells, you will make a profit. In this example, traders will buy Australian dollars and sell dollars at the same time.
For example, if the AUDWDUS pair is purchased at 0.74975 and the transaction is closed / withdrawn, the profit for the pair moving to 0.76466 would be 149 points. (see chart below...)
Ideas behind foreign exchange trading
If it falls to 0.74805 before trade closes, trade losses will be 17 percentage points.
In the same way, there is no difference in currency between you. If the price of money you buy rises from the time you buy it, you will make a profit.
Here is another example of using AUD. In this case, we still want to buy AUD, but let us use the euro currency.
In this case, we will sell the pair. We will sell the euro and buy the Australian dollar. If the Australian dollar appreciates against the euro, we will make profits when we buy the Australian dollar.
In this case, if we sell EURAUD at 1.2320, and when we close this position, the price drops to 1.2250, we can make a profit of 70 points. If this pair is on the bench, we close at 1.2360, and we lose 40 points in the transaction.
Remember, we always buy or sell the two currencies. If we buy the money on the left, which we call base money, we sell a currency on the right called cross currency or anti-currency. If we sell the money to the left, the opposite is true.
Now let's see how traders can make profits by selling a pair of currencies. This concept is slightly more complicated than buying. It's based on selling what you borrow rather than selling what you have.
In the case of currency trading, when you sell a place to sell, you borrow a pair of currencies from your broker (all seamlessly at the end of the transaction) and if the price falls, you sell it. ER at a lower price. The difference between the price you borrow (the higher price) and the price you sell them (the lower price) is your profit.
For example, traders think the dollar will depreciate relative to the yen. In this case, traders will want to sell the US dollar to the Japanese yen. They will sell dollars and buy yen at the same time.
Traders will borrow dollars from brokers when they execute transactions.
If trade is in their favor, the yen will appreciate and the dollar will depreciate.
When they stop trading, their profits from the appreciation of the yen will be used to repay brokers who lend dollars at lower prices. After paying the broker, the rest will be their profits in the transaction.
For example, suppose a trader shortens the US dollar to the yen at 122.761.
If the two companies actually fell and traders closed / quit at 121.401, the profit would be 136 percentage points.
Short currency pairs, such as the US dollar to the Japanese yen.
On the other hand, if the pair is short-circuited at 122.761, and this pair does not move down, but when the position is closed, it moves to 122.951, there will be a loss of 19 points.
In short, this is the way you can profit from things you don't own.
At the end of the transaction, if you buy a currency pair and then appreciate, the transaction will be profitable.
If you sell a currency pair and then fall, the transaction will be profitable.