What is foreign exchange?

What Does foreign exchange Mean

The most common use of the term currency is linked to a foreign currency . Its meaning, therefore, depends on the position of the speaker. In Argentina , Chile and Uruguay , to name three cases, the dollar is a currency. In the United States , on the other hand, it is not, since it is its national currency. This means that no unit is a currency in itself.

Currencies, in short, are the currencies that are part of a monetary sovereignty different from that of the country in question. Returning to the previous example, the governments of Argentina , Chile and Uruguay have no influence on the dollar, they cannot apply monetary policies to influence it. The US authorities, on the other hand, can modify their conditions.

The value of currencies usually varies according to the operations carried out in the international money market . In this way, the exchange rate is established , which is the relationship between a national currency and a currency. At the end of July 2018, to buy a dollar in Argentina , almost 28 pesos had to be delivered . The exchange rate of this currency in the Argentine territory, thus, was about 28 pesos per dollar .
Currency is a very important component of the economy . To import services and goods, or to make investments abroad, you need foreign exchange (usually dollars or euros). These currencies, in turn, are obtained thanks to exports and foreign investment. The ratio of outgoing currencies to incoming currencies depends on the level of currency available in a country.
Currently, the market gives us the ability to buy and sell various types of currencies internationally without moving from our Internet browser. More specifically, investors today often use an online market called Forex ; It is important to note that its hours of operation have limits: it is open for five days a week.
To make money through the purchase and sale of currencies it is necessary to have certain knowledge, in combination with a good intuition and, as in many other cases, a bit of luck. The first step to a successful transaction is to examine the exchange rate for the currency that interests us based on which we want to sell, paying special attention to the fluctuation of its values ​​in recent times.
The fluctuation of currency values ​​is very common, and can occur for many reasons, such as government instability or even a natural catastrophe. Once all this is understood, we must develop a strategy that focuses on buying currencies whose value we believe will increase by using others, whose value we believe will decrease.

It goes without saying that in this type of operation there is always a risk proportional to the magnitude of each investment, which is why we must be convinced before taking a step. A very common practice among investors is the so-called "leverage", which consists of borrowing money to deal with the purchase of new currencies. Of course, this bet adds to the risk of losing money that of contracting a considerable debt.
Although forex trading may seem overwhelming at first, given that the potential benefits are incalculable, we should not appease our desire to become investors out of fear of losing money. Fortunately, in most online marketplaces we have the ability to create an account to run simulations, the best way to learn until we are sure we can go "into the real world."

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