Forex or Foreign Exchange is the largest currency market on the planet. On a daily base, the biggest currency market trades more than $3 trillion. This market began in 1971 when the global exchange rate shifted to a floating one. Forex traders have made huge earnings since then. You can learn the basics of how the forex market works by gaining a basic understanding. It is important to have the right guidance in order to get real returns on your Forex investments. If you want to hire a Forex broker, try MetaTrader or Dukascopy. The purpose of this article is to provide an explanation for the most basic aspect of Forex which is exchange rates. Read this?
What is the exchange rate?
It is the exchange rate between one currency and another. For daily transactions, it is necessary to have the currency in a foreign nation when traveling. This is known as the exchange rate. If you travel to Egypt from U.S., the exchange rate would be 1:5. It means that for each dollar you spend, you get five Egyptian pounds.
Based on these two methods, the rate of exchange is classified as either fixed or floating.
Fixed Exchange Rate
Forex is built on the foundation of this system. Private market demand and supplies of currency determine a floating exchange. To make money, forex brokers must inform clients of the best rates. They include FXCBS, Windsor brokers, FXCM, and FXOpen. As the fluctuations in the market correct the rate, a floating-rate is called’selfcorrecting.’ A floating rate fluctuates constantly.
Fix exchange rate
Pegged exchange rates are the official currency exchange rates of countries, determined by their central banks. Fixed exchange rates are defined as the price set for a currency against a large currency. This is usually US Dollar. In order to keep the currency supply constant and maintain the exchange rate in the country, the central banks trades their own currency. The central bank regulates the monetary policies of the country and is responsible for printing and distributing all currency in the economy. It is up to the central bank to change exchange rates whenever necessary.