What are the Forex rates and Spot rates?
Forex rates or spot rates both are the same, and even we call it the exchange rates.
Any bank or authorized dealer in foreign exchange what they are generally doing?
They are in the business of buying and selling currencies.
What do you think the rate at which they buy the currency and the same price at which they sell currency?
No, not if they are into the business, they must earn some margin that is the profit margin for themselves.
They have to buy at a lower rate and sell at a higher price to maintain that margin of profit.
Therefore the difference between the rate at which the bank will buy the currency and at which bank will sell the currency known as a bid rate and ask price.
What is the bid rate, and what is the Ask rate?
The bid rate is a rate at which the bank will buy, and the customer will sell the currencies.
The Ask rate is a rate at which the bank will sell, and the customer will buy the currencies.
The difference between the Ask rate and bid rate will be the profit margin for the bank.
What are forex rates in the forex market
The foreign exchange, or forex market, is the world’s largest
And it plays a vital role in the global economy.
Every day, trillions of dollars exchanges from one currency to another.
This kind of currency exchange is essential for international business.
Forex market participants include governments, businesses, and of course, investors.
Governments use the forex market to implement policies.
For example, when conducting business with another country, whether it’s borrowing money, lending money, or offering aid, a country needs to convert its currency into a foreign currency.
Businesses use the forex market to facilitate international trade.
How does forex trading works?
When you trade forex, you’re not just buying one currency,
but also, you’re selling other currencies against each other.
It calls as a currency pair.
The quote for a forex currency pair defines the value of one
currency relative to the other.
The easiest way to understand any quote is to read the pair
from left to right.
Let’s look at an example of using the EURUSD currency pair.
If the EUR/USD is trading at 1.20, that means 1 euro is equal to 1.20 US dollars.
Here’s another example of using the USDCAD currency pair.
If the USD/CAD is trading at 1.25, that means 1 US dollar is equal to 1.25 Canadian dollars.