What Is the Electronic Currency Exchange?
The electronics currency exchange is a system where you can buy and sell paper money from foreign countries with an online brokerage account. This foreign exchange market is commonly referred to as the forex. Currencies are always traded in pairs of two separate countries and money is never physically exchanged, the entire process is done electronically.
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Base Currency
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Base currency is the actual type of money you will be using in your account to purchase dollars from other nations. Examples would be the US dollar, Japanese yen, or the euro.
Exchange Rate
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The exchange rate is the difference in value between the currencies of two countries. An example would be spending one US dollar to buy a single Japanese yen with an exchange rate of 91.88. This means you would receive 91.88 yen for each dollar you invest.
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Concept
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Investors exchange their base currency for that of another country. When the exchange rate between the two countries fluctuates, an opportunity to sell the currency back at a profit is created.
Time Advantage
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The currency exchange is open 24 hours a day, six days a week, giving you the ability to trade at various times you like.
Monetary Advantage
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Unlike stock or commodities trading, companies that let you trade on the forex market do not charge commissions.
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References
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- Photo Credit dollars image by peter Hires Images from Fotolia.com
