In the simplest terms, we make predictions and we spend money based on those predictions. There are many tools traders use to make these predictions, from analyzing charts to following major news events.
As an example. Imagine you were reading that England will take a hammering due to some major news coming out (example, Brexit). But then you read that Australia is getting a lot of interest from international investors and their currency is going to get stronger. So we say that the GBP is getting weaker and AUD is getting stronger. So we sell GBP and buy AUD. Once we see that the movement has happened we close our trade and cash in!
As an example. Imagine you were reading that England will take a hammering due to some major news coming out (example, Brexit). But then you read that Australia is getting a lot of interest from international investors and their currency is going to get stronger. So we say that the GBP is getting weaker and AUD is getting stronger. So we sell GBP and buy AUD. Once we see that the movement has happened we close our trade and cash in!
