Making Forex Trades
You can trade a currency based on your individual perception of what its value is now and what it will be in future. If you believe a currency’s value will increase, you take a long position on the currency, that is you buy and hold the currency wishing to sell it in future when the currency value has increased. If you think its value will decrease you engage into a short position on the currency, that is sell the currency at current price anticipating that its price will decrease in future, so you can buy it back at a cheaper price. If your sentiments were correct you make a profit on your position. Profit made is the spread, calculated as the difference between the buy and sell price. If your predictions were wrong you make a loss on your position.
Let’s say you believe the US dollar will increase in value against the ZAR. Your pair is USD/ZAR. Since you think the US dollar will increase, you buy USD/ZAR, buy the US dollar. If you believe the US dollar will decrease against the South African Rand, you sell USD/ZAR, sell the US dollar.