Money Changer Relationship and Forex Trading

Banks are financial institutions that also play a role in providing foreign currency exchange services. However, the provision of foreign currency exchange services is prioritized in buying and selling large amounts of foreign currency. While individual foreign exchange traders are usually able to accept foreign currency exchange agreements in smaller amounts, sometimes even receiving currency exchanges with a nominal value of 1 currency of a country. The profit earned by this individual foreign exchange trader is derived from the difference in the specified buying and selling rates. Each foreign exchange trader can set different buying and selling rates, but the difference in price benchmarks between one trader and another is usually not too much to maintain competition.

The selling rate is always greater than the buying rate. This difference is what becomes an advantage for foreign exchange traders in running the foreign exchange business. When people exchange foreign currency for them, they will raise the price a little. Conversely, when people want to sell foreign money to them, the price is set to be lower. The principle is almost the same as buying and selling electronic goods. When you buy from a store, the price will be higher than when you decide to resell the electronics, even for the same store.

Now, the form of foreign exchange trading has been developed in a more modern way using forex. Forex is not much different from conventional money changers. The difference lies in the media used for doing business. Forex does not require you to be in the heat or in the rain to arrive at a foreign currency exchange but by using a computer application that is easier and more flexible. It can almost be said that Forex is a foreign exchange trading business that requires almost no capital in the form of liquid funds. The basic principles of Forex are not much different from conventional money changers whose way of working has been explained in the illustration above. The media is the only difference between Forex and the old money changer.

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