Here is a brief summary of how currency trading works
In forex trading, exchange rates are quoted for fixed currency pairs e.g. GBP/USD – British Pound rated against the US Dollar.
"USD/GBP" does not exist. USD often appears first in other pairs, though.If, for example, the
GBP/USD is quoted at 1.9754, it means 1 pound is worth 1.9754 dollars. For forex trading, there are two prices quoted: Bid (or Buy Price) and a higher Ask (Sell Price). The difference between the two prices is called 'spread' and is quoted in 'pips' (the final digit in a currency rate). This resolves to a real money value, depending on the amount of currency traded. One pip is worth about $1 for a 'mini' account and $10 on a 'standard' one.Buying the above 'pair' means buying GBP at the Buy Price. Selling means selling GBP at the Sell Price.
Taking different factors and indicators into consideration, a forex trader will decide whether to buy or sell the pair by entering a trade. This can be done at a future price (if it is reached), or at the current or spot price.
After opening the trade, the trader waits for the desired price movement in his
favour, then closes the position (a reversing transaction is made). Profit or loss on the trade will be the difference between the prices at entry and exit points, less the spread which is retained by the broker.
So after entering a trade, the trader is waiting for the prices to change by more than the value of the spread before he or she can start to make a profit. At a chosen point the trader can close the position and take the profit (difference in pips less the opening pip spread). Conversely, in a losing trade (the price moves in the 'wrong' direction), at some point the trader will 'pull the plug' and close the position in order to prevent further losses. The loss will be the difference in pips plus the opening pip spread too.
All traders are aware of this and some will choose forex brokers with low spread. However this is not the only criterion for a good dealer or broker – one who is fair and reasonable. There are many methods that unscrupulous or dishonest brokers use to make money from traders without their realising it.
To become a trader,or be an expert on the subject. It does help to have a basic understanding of how the markets work, and the easiest way to learn something about forex is by opening free demo and live trading accounts at Marketiva and they even give you free $5 in real money to trade with! The best on the internet.