Foreign currency exchange

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The Foreign Currency Market

The currency market or Forex market as it is more commonly know to individuals regularly associated with moving or transferring funds abroad has always been regarded as the world's most dynamic market. The very nature of its fickle and unpredictable movements is what attracts millions of traders in search of potential opportunities.

The market trades 24 hours a day around the world, turning over an immense $ 1.8 trillion or around £ 1 trillion pounds per day. Contrary to popular belief this market isn't exclusively dominated by major banks and financial institutions.

The currency market is a result of billions of units of currency being either bought or sold on a daily basis. Whether buying a property abroad, emigrating or purchasing overseas goods, there are significant savings to be made by considering the impact of market movements as well as the advantages of dealing with a specialist currency provider.

Foreign exchange is fundamentally about exchanging one currency for another. The exposure comes from the fact that the market moves continuously and as the market moves a currency pair will either become stronger or weaker, more expensive or less expensive.

For example, consider exchanging £ 10,000 into US Dollars at a rate of $ 1.95 which would buy you $ 19,500. If the Dollar strengthened by 10 cents to $ 1.85 the same sterling value would only buy you $ 18,500 ($1000 Less) - alternatively it would now cost you £ 10,540 (£540 More) to buy the same amount of US Dollars that you could have bought when the market was at $1.95.

It is important to bear in mind when trawling internet sites in search of exchange rates that most rates published are known as mid-market or interbank rates. These mid level prices are neither buy rates or sell rates but the mid point between the two derived from large value dealings in the overall currency markets.

Buy rates and sell rates will differ depending on the foreign exchange provider you use, inevitably the margin built into the exchange rate is where the money is made. It is for this very reason that banks and larger financial institutions require bigger spreads in order to compensate for expensive overheads.

If you are considering dabbling in the fastest moving market in the world, you will need to consider the risks and exposure associated with the uncontrollable and often unforgivable market movements. While this warning may fray even the strongest of nerves, it isn't as fraught with danger as it sounds. Risks can be dramatically reduced with the expertise and tools provided by any number of today's currency specialists.

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