Before you make a deal you choose two different currencies – the currency pair. One of them is the base currency, the other is the quoted currency. Your task is to try to predict how the quoted currency will change relative to the base one. If you are sure that the rate of the quoted currency will increase, you can open a deal to “buy” it. If you think it will fall – on “sell”.
Most often, the dollar is chosen as the base currency, you can choose any other quote currency.
You have chosen the currency pair – the euro and the dollar. Dollar – base currency, euro – quoted currency. For example, you expect the euro to rise against the dollar.
Now, the euro is worth $1,213. You open a deal to “buy” the euro for $100. In reality, the euro does not come to your bank account, but it is reflected in the internal register of transactions of the forex dealer and on your balance in the program.
Suppose after a day the price of the euro really rises to $1,223. You don’t think it will rise anymore and you close the deal. Thus you fix the profit: $(1,223 – 1,213) x 100 = $1. This money will be credited to your real bank account by the Binatex dealer – your deposit will be replenished. If the euro falls to $1.113, your loss will be: $(1,213 – 1,113) х 100 = $10. And this money will be written from your bank account by your forex dealer.