Profit or loss in Forex trading depends on buying low and selling high, or selling high and buying back lower. Leverage allows traders to control a larger position with a smaller deposit.
Example:
Mary deposits $5,000 into her Forex trading account with 1:100 leverage, giving her $500,000 buying power.
She buys 0.1 lots of AUD/USD at 0.99802.
Three days later, AUD/USD rises to 1.04069, and she closes the trade.
Her profit: 426 pips (1.04069 - 0.99802) = $426 ($1 per pip).
If the price had dropped to 0.97802, she would have lost 426 pips, resulting in a $426 loss.
Note: Trading Forex carries risks, and losses can exceed your initial deposit.
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