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What is Forex

FOREX (Foreign Exchange Market) is a global currency market that exchanges a certain sum of currency from one country to the currency of another at a changing rate, subject to the date of exchange.

How to make money in Forex

We shall assume that you are trading 5000 USD account, with 1:100 leverage. Having analyzed the change of the USD/JPY rate by means of a method of convergence – divergence of the sliding averages MACD (the fast line has crossed the slow from top to down) – you make a decision to buy 100.000 USD against the Japanese yen at the price of 95.00 .Within a few hours of a day when the USD/JPY rate has grown on 200 points, and becomes 97.00, you decide to close a position; therefore, you will have sold your dollars at a higher rate than what you bought them at, and made a profit. (Keep in mind that the possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose.)

The profit (loss) = [(the price of closing - the price of opening) lot's weight] / price of closing
Profit = [(97.00-95.00) *100000]/97.00=1030.02 USD

In few hours you just made 20% profit from your capital.

Risk of Forex Investment

From the previous case, if USDJPY down 200 pips to 93.00, account suffer loss around 20%. Even with best strategy and analysis, there is no system that guarantee 100% profit in forex. Sometimes a trading system will suffer a loss, but with small percentage compared to its profit. Forex trading is very high risk investment and there is no profit guarantee and no capital protection guarantee, so make sure you check your investment objective and your risk profile before investing in forex market.