Foreign Exchange

The 'Forex' market is easily the biggest sector of the financial marketplace and is controlled by the major commercial banks, and as such is virtually a closed-shop to the individual investor. The 'spread', which is the difference between the purchase price and sale price, is set by the Forex trader and it is here the banks make their profits.

Foreign exchange rates, the relative value of two currencies, can be expressed in two ways: most commonly it is the amount of a currency needed to buy $1 (US), but rates can also be expressed by the opposite method of how many dollars it takes to buy one unit of said currency.

When making investments in foreign countries you may be required to buy some of the currency of the given country, and local exporters may expect to be paid in that currency, if they do not accept US dollars.