Understanding Forex

If you’ve been hearing about Forex trading, it is simply buying or selling currencies.
Placing a trade in the foreign exchange market is simple: the mechanics of a trade are very similar to those found in other markets like the stock market, so if you have any experience in trading, you should be able to pick it up quickly.
The object of forex trading is to exchange one currency for another in the expectation that the price will change, so that the currency you bought will increase in value compared to the one you sold.
Example:

Trader's Action	EUR	USD
You purchase 10,000 euros at the EUR/USD exchange rate of 1.1800	+10,000	-11,800*
Two weeks later, you exchange your 10,000 euros back into U.S. dollar at the exchange rate of 1.2500	-10,000	+12,500**
You earn a profit of $700	0	+700

*EUR 10,000 x 1.18 = US $11,800
** EUR 10,000 x 1.25 = US $12,500

An exchange rate is simply the ratio of one currency valued against another currency. For example, the USD/NAIRA exchange rate indicates how much NAIRA one US Dollar can purchase, or how many US Dollars one NAIRA can buy.