Making money trading forex involves buying lower and selling higher or selling higher and buying back lower, using leverage means that you are able to deposit a smaller amount of money to achieve the same buying power as you would have it your brought and sold the currencies outright.
In the example Mary deposits $5,000 into her forex trading account and nominates the leverage on her account to be 1:100. As a result of leverage Mary buying power on her $5,000 deposits becomes $500,000. Mary decides to BUY 0.1 lots of the AUD/USD par at a price of 0.99802, 3 days later the price of the AUD/USD is 1.04069 and Mary decides to close her position. Mary profit is calculated as (1.04069 – 0.99802) 426 pips. As many opened a position of 0.1 lots Mary made a profit of $426 or $1 per pip.
Of course should the AUD/USD moved againts Mary below the opening price of her trade to a level of 0.97802 Mary would have incurred a loss on the trade of (0.99802-0.95542) 426 pips. As Mary position size was 0.1 lots Mary would have incurred a loss of $426 or$1 per pips.