What is traded in the Forex market if the stock market trades in a company’s stock then on the forex market ( FX Market ) trades the currency by buying a country’s currency by selling currencies of other countries. Suppose that Buy EUR / USD means we buy Euro (EUR) and sell Dollar (USD).
When do we buy or sell a currency pair that is of course when we can predict price movements will be an uptrend or downtrend to reap profits. For example, when we predict that the Dollar (USD) will strengthen (uptrend) against the Euro currency (EUR) due to political and economic factors in the US, we will take action Sell EUR / USD by selling Euro currency (EUR) and buying an eye Dollar (USD) (say take Open Sell position 1.35262 ) with a volume of 10000 (10K).
Because our predictions are correct, the price of the Dollar (USD) will rise and the Euro (EUR) will weaken to 1.34262. If we close the position by Close Buy 1.34262 it will get a profit of 100 pips or $ 100 (1pip equals $ 0.1 per 1K).
What if we mistakenly take a position against the market direction in this case (EUR / USD uptrend) that is by opening an Open Buy position EUR / USD 1.35262 with a volume of 10000 (10K) and closing the Close Sell position 1.34262 then it will get a loss of 100 pips or $ 100 . How about, horrified right? therefore, follow the movement of market direction and never fight it or you will lose.
In the forex market, besides being able to get profits when prices rise (uptrend), we can also benefit when prices fall (downtrend) as the example above is the movement of the EUR / USD currency pair. And we can get losses if we fight the direction of the forex market. Therefore, be a friend of the market and never fight it.