How Many Deals Are Made On The Forex Market, And Can You Provide An Example?

The object of the game in forex trading is to make a profit when the value of two currencies changes in favour of the trader. Many people believe that's the case; the forex market is daily worth on average in excess of $1 trillion. That is a phenomenal amount of money, more than 50 times larger in fact than all the futures markets combined.

As an example, imagine you had £10,000 to play with and bought dollars when the exchange rate was two dollars to the pound. You would then have $20,000 after this conversion.

Now, if the value of the US dollar against the pound increased then you would sell (exchange) your US dollars and have more pounds than you started with. Easy peasy, and as straight-forward as it sounds this is the crux of forex trading – buying and selling currency when exchange rates move in your favour.

The worst case scenario of the above example is that US dollar could weaken further against the pound and you would immediately begin eroding your initial pot. Unless, another opportunity arose to sell your US dollars on against a favourable shift in a third currency.