Placing a Trade in The Forex Market

Placing a trade in the forex market is basically the same as placing a trade in any other market. Some people get confused because they feel they are not buying or selling anything like in the stock market, were you buy or sell part of a company.

We will dissect a trade from beginning to end in order to understand what is being done in the process.

Step 1: The trader has USD 10,000 in his forex broker account.

Step 2: In the morning the GBP/USD quote is 1.7478. This means that every GBP (Great British Pound) is worth 1.7478 dollars (i.e. 1:1.7478). Based on his analysis, the trader thinks that within the next 24 hours the GBP will gain strength against the US Dollar (i.e. a single GBP will exchange for more dollars). The trader wants to profit from the speculated move.