In examining your data this morning, you come to believe that the Euro might appreciate in value against the US Dollar in the near future and the current exchange rate is EUR/USD = 1.4210. As such, you decide to exchange US$ 100,000 to purchase Euros.US$ 1.00 = EUR 1.4210
US$ 100,000/1.4210
You will receive EUR 70,373
Profit Realization
Later on, as expected, the Euro appreciates by 75 pips to EUR/USD = 1.4285. You then decide to sell your Euros and exchange them back into US Dollars to earn a profit by selling at this higher rate after buying at the lower rate.
US$ 1.00 = EUR 1.4285
EUR 70,373 x 1.4285
You will receive US$ 100,528
Your profit = US$ 528
Note: Your $100,000 purchase of Euros was leveraged, relatively risk-free to you, as you executed this transaction with only $1,000 of your money invested upon which you received a $528 return. Remember that you can only lose a portion of the money you have actually invested in margin, not the amount of the transaction.
Welcome to the world of Forex investment!
For insight, see "Currency Pair Exchange Rate/Trading Value" and "Concepts and Terms of Forex - Beginning with the Basics".
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