Forex explain

FOREX trading is simply the buying and selling of currencies. The US dollar is almost always the base currency against which other currencies are bought and sold. Of course, ones local currency can also be used as a base currency. In such a case it is called a CROSS TRADE. Cross trading is then an exchange of two currencies where the US dollar is not involved.
Say you suspect that the Japanese Yen might appreciate in value against US dollar in the near future. The current exchange rate is 120 yen to a US dollar. You go to the bank and exchange US $10,000 for 1,200,000 yen.
US$ 1.00
=
¥ 120.00
US$ 10,000.00
=
(120*10,000)
You will get:
¥ 1,200,000.00
Profit:
Later on, as expected, the Yen appreciates by five yen to 115 yen to a US dollar. You then take your yen back to the bank and exchange them into US dollars. You will get US $10,434.78. This extra US $434.78 is your profit on top of
¥ 115.00
=
US$ 1.00
¥ 1,200,000.00
=
(1/115)*1,200,000
=
US$ 10,434.78
Initial Investment was:
=
US$ 10,000.00
Your PROFIT:
=
US$ 434.78
Loss:
On the other hand, instead of appreciating, the yen further weakens. After all, it was only an expectation that the Yen will appreciate, not a guarantee. Let's say the Yen weakens by five yen to 125 yen to a US dollar. Of course, you now have a choice to either hold onto your yen until it appreciates or exchange them back into US dollars. Suppose, you want to exchange them back into dollars for fears of further yen weakness. You then take your yen back to the bank and exchange them into US dollars. You will get US $9,600.00. Your loss is US $400.00 . Now your initial investment of US $10,000 is reduced to US$ 9,600.
¥ 125.00
=
US$ 1.00
¥ 1,200,000.00
=
(1/125)*1,200,000
=
US$ 9,600.00
Initial Investment was:
=
US$ 10,000.00
Your LOSS:
=
(-US$ 400.00)
FOREX trading is neither gambling nor should it be perceived as such. In gambling, once you place a bet you cannot withdraw from a losing situation. You either win or lose. On the other hand, in FOREX, you decide how much you are prepared to lose or wait until you are in a profit situation. FOREX trading provides several means to accomplish just that.
Hence, one can trade FOREX euphorically or in an organized manner. The tools and techniques are there; it's up to you to use them for your best interest.