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Contrary to common belief, however, stocks do not give shareholders ownership rights. Traders can also make money when share prices fall by short-selling, or selling shares of borrowed stock when the price is high and then repurchasing them when the price falls, and pocketing the difference as your profit. Since every forex trade involves exchanging one particular currency for another, the value of a currency is determined by how much of another currency it can buy.

Since short-term price movements of currencies are very small, the trader generally avails of leverage, or borrowed money from the broker, to be able to make larger trades and increase their potential profits.