Best currency exchange rates with FxPro MetaTrader
Foreign Exchange market or Forex is the largest market in the world. More than $3 trillion is traded in the largest currency market on a daily basis. The market came into existence in 1971 with a shift in global trade from fixed to floating exchange rates. Since then, the traders are making enormous earnings from the Forex market. A basic knowledge can get you familiar about the functioning of the market. However, proper guidance is required to make true profits from your Forex investments. You can hire the services of an experienced Forex broker such FxPro MetaTrader, IamFX, Dukascopy, AAAFX etc. However, this article is written to explain the very basis of Forex that is the exchange rate.
What is an Exchange Rate?
This the rate at which one currency can be exchanged in terms of other. When you travel to a foreign country, you require to purchase the local currency of that country for daily transactions. The price at which you purchase that currency is called exchange rate. For instance, you are travelling to Egypt from U.S. And the exchange rate is 1:5. This means that with every U.S. Dollar you can purchase five Egyptian pounds.
There are two ways to decide the price of a currency and based on them the exchange rate is categorized as floating and fixed.
Floating Exchange rate
This is the basis of Forex trading system. A floating exchange is determined by the private market on the basis of demand and supply of a currency. And, the work of forex brokers is to intimate their client about the favourable exchange rates, in order to make a profit. Some of the eminent brokers are FXCBS, Windsor brokers, FXCM, and FXOpen. A floating rate is also termed as ‘self-correcting’ as the variations in the market automatically correct the rate. A floating rate changes constantly.
Fixed Exchange rate
A pegged or fixed exchange rate is the official exchange rate of a country, which is determined by the government (central bank). A fixed price of the currency is defined against a major currency, usually U.S. Dollar. The central bank trades its own currency, in the Foreign Exchange market, to maintain the money supply and local exchange rate. The central bank is the regulatory authority for country’s monetary policies and is the sole printer and provider of notes and coins circulating in an economy. The central bank can change the exchange rate whenever required.
In fact, none of the rate is completely fixed or floating. In a fixed system, the rate gets influenced by the market pressures. And, in a floating regime, sometimes the central bank intervene to ensure stability. Keep learning about new concepts and strategies with leading Forex Brokers viz FXCBS, FXOpen, Dukascopy, FXDD, and more.
The author is an experienced Forex broker who have experienced the services of eminent brokers like FxPro MetaTrader, Windsor Brokers, IamFX, and FXCBS.
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