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Foreign Currency Converter: An Essential Tool For Retail Forex Trading

The international spot market for foreign currency exchange is known as Forex, or simply FX. Recently, retail traders – small and large – have gained access to this market through electronic trading platforms. These are connected to Forex market makers who fill orders for foreign currencies. These new retail traders are major users of online foreign currency converters.

Foreign currencies are bought and sold directly between individual traders. This is in direct contrast to commodities and stocks, which are traded on central exchanges like NASDAQ and the NYSE. If a trader possesses a currency that increases in value compared to another currency, he makes a profit. To determine the relative values, he can consult an online foreign currency converter.

How to use a foreign currency converter

Currency exchanges are always done through currency pairs, which may be entered into a foreign currency converter. The most popular currencies (known as "the majors") are: US Dollars, Euros, British Pounds, Japanese Yen, Canadian Dollars, Swiss Francs and Australian Dollars. That’s why online foreign currency converts generally list these currencies first: it’s more convenient.

The US dollar is the standard base currency for most Forex transactions, simply because it’s the most liquid and widely-traded currency in the world. That’s why it’s usually one of the default currencies on online foreign currency converter tools.

More and more active traders are now trading foreign currencies, to broaden profit opportunities. This is doubly true when volatility in the stock markets is low. Forex is the largest, most liquid financial market in the world. Because of the dynamic nature of currency exchange rates, Forex offers tremendous profit opportunities at all times. And for up-to-the-minute rates, you need simply check your online foreign currency converter.

The retail Forex market has undergone remarkable changes since the late 90’s, and is still a fairly new concept. Online foreign currency converters are becoming more widely used every day.

Remote, electronic service for retail Forex traders only emerged in the last five years. And it’s gone through some huge changes since then. Until recently, Forex trades were done primarily between traders for major banks, connected to the Interbank currency trading network – and without online foreign currency converters. Most transactions were conducted over the phone (remember the phone?) and to those looking to exchange foreign currencies outside of the Interbank network, market makers charged a significant premium on top of the set price. How things have changed.

Growth of speculation, smaller investors, and the online foreign currency converter

There have been two major changes, allowing retail traders access to the Forex market. First, currency speculators now dominate Forex. Thirty years ago, speculation (the attempt to cash in on currency fluctuations) was fairly rare – perhaps 20 percent of trades, and there was no such thing as an online foreign currency converter. The bulk of Forex currency trades were done simply to clear the cash positions of one denomination. For example, when a Japanese company needed to buy goods from Canadian firm.

But now, pure speculation makes up almost 90 percent of the Forex market! In fact, it’s now bigger than the equities market. With nearly two trillion dollars traded on the Forex spot market every day, it’s now the world’s largest speculative market by a huge margin, and use of online foreign currency converts has exploded.

With this speculative market exploding, those outside of Interbank became aware of the opportunities in Forex -- and started entering it. To accommodate all these new FX traders, electronic trading systems were quickly set up. In the last few years, individual investors have finally gained access to these electronic trading systems, as well as online foreign currency converters.