In the stock market, you make money by buying and selling stocks. In the real estate market, you make money buying and selling real estate. In the forex market you make money by buying and selling currencies … buying and selling money, the currencies of other countries.

Here’s an example:

Let’s say you believe that the Euro will become stronger against the US Dollar. So you go down the the foreign exchange office at the closest international airport and convert $10,000 dollars to Euros at the rate of one dollar to €1.25 Euros. So you now have 8,000 Euros and, as it turns out, you were right! Thirty days later, the Euro is valued at €1.35 to $1.00 and you convert your 8,000 Euros back to US dollars. You now have $10,800 in US dollars … an $800 profit.

It works whether you go long (expecting the other currency to rise) or go short (expecting the other currency to fall).