The main point of gaining money from the Forex is to guess correctly the direction of the financial instrument that you are going to invest in.
One of the main benefits of investing in the Forex market is to be capable of making transactions in two directions. In standard terms, if you are doing transactions in the stock market, you have to buy cheap stocks and wait for their value to increase. However, in the Forex market, you have a chance to make a transaction not only related to the increases but also related to decreases.
Now, let’s have a look at the graphic below.
This pricing graphic is a screenshot of a price graphic related to EURUSD parity that belongs to anytime. Let’s assume that you guess that the price will decrease when it is at the level of 1,1400 in A point. In this situation, you must open a selling position. If your assumption is true and the price decreases, you gain money. But let’s assume that the price comes to the B level, which is 1,1300 and you close the position of selling which has been open. In this situation, you will gain between 1,1400 and 1,1300.
Now, let’s look at this situation more detailed way.
Let’s assume that you open a selling position in the level of 1,1400 1 lot. In the related parity, (EURUSD), 1 lot represents 100.000 level of increases in the EURUSD parity. (You can have a look at our article called What Is LOT if you want to learn about LOT.)
If you tell your broker company to sell your stock while the price in the level of 1,1400, for 100,000 EUR, they sell it for 100,000 EUR and it gets 114,000 dollars.
When the price reaches the level of 1,1300, if you say ‘’Now, close the position.’’, the broker company takes the 100,000 Euro to its case. However, because of the price decreases to the level of 1,1300, the broker company needs 113,000 Dollar to take 100,000 Euro back. It takes it from this charge and closes the position.
Now, you have made your broker company sell the 100,000 Euro for 114,000 Dollars and made them buy it back for 113,000 Dollars. There is still 100,000 Euro in the broker company’s case but the 1000 Dollar gain is now yours.
In the next section of our scenario, let’s assume that this time, you guess the price will increase. You have gained money by closing the selling position at B point. Now, let’s assume that you are going to open a purchasing position by thinking that it is going to increase.
What did you do by doing that? You told your broker company to purchase 100,000 Euro. And then, your broker company purchased 100,000 Euro for 113,000 Dollars.
When the price increases and reaches the point of C, if you close the position, your broker company’s case would gain 114,000 Dollars because it is going to sell the Euro for 1,1400 level.
Now, you made you broker company to purchase 100,000 Euro for 113,000 Dollar and made them sell it for 114,000. The 1,000 Dollars gain is now yours.
Making transactions in Forex is that easy.
So, how much money do you need to do that? It is completely up to your account. (You can learn about Levers by going to our article called What Is Levers?).
For example, if your account’s lever is 1:100, you can achieve a position of 100,000 Euro and 1 LOR for 1000 Euro guarantee, which be in equipoise of 1 percent of the position. This way, you can achieve a transaction that has 100,000 Euro value by just using 1000 Euro. If you think about the examples above, you have gained 2000 USD from two positions just by using the 1000 Euro guarantee.
However, you need to remember that, you may lose money if the transactions in the Forex market start to have a direction that opposes your assumptions. The risk and gaining are equal. So, in Forex, for no position, you should use all your resources.