How Does A Forex Trade Work?

The purpose of any Forex trade is to swap one currency for another in the belief that the market will move and prices change such that the currency that you buy rises in value in relation to the currency which you sell.
The first important point is that each trade involves two currencies - the currency which you buy and the currency you sell. This gives us our first two important trading terms - the long position and the short position.
You take a long position when you buy a currency in the belief that it will rise in value and that you will able to sell at a profit.
If you sell a currency in the belief that it will fall in value you take a short position and hope to make a profit by buying it back again once the price has fallen.