Foreign exchange transaction is a financial transaction behavior aiming at exchange rates of different currencies, therefore when you estimate correctly the tendency of currency exchange rates in a transaction; you will probably gain potential profits. On the contrary, when your estimation is wrong, you will probably incur potential loss. For example, basing on your observation of exchange rate between EUR and USD in the market, you consider that currently USD is underestimated compared with EUR and you estimate that USD will go up in the future. Therefore, you buy certain amount of USD using ERU in advance. If market tendency is in accordance with your estimation and USD increase in value compared with EUR, then you gain profit by selling and exchanging USD into EUR. On the contrary, if USD devaluates compared with EUR, then you will lose. We call this kind of transaction aiming currency tendency as taking long-term position; on the contrary, we call the transaction aiming at short-term fluctuation as taking short-term position. In foreign exchange market, to gain the maximum profit, the two kinds of trading are usually combined.