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Definition

Foreign Exchange (Forex)

Foreign Exchange is the system or process of converting one national currency into another and of transferring money from one country to another. It is also known as Forex and FX.

Foreign Exchange means various instruments used to settle payments for transactions between individuals or organizations using different currencies (e.g. notes, cheques, etc.)

These exchanges happen in the foreign exchange market or the forex market and it is the most liquid market in the world. There is no physically located market that deals with Forex but the globally connected banks, brokers and traders with electronic links between them. 

Types of Foreign Exchanges

These exchanges can differ based on the type of market they took place. There are these five types of forex exchanges listed below -

  • Spot Exchange
  • Forward Exchange
  • Future Exchange
  • Option Exchange
  • Swaps Exchange

For example, one can spend 1000 United States dollars on the Forex and get it converted into the Great Britain Pounds and the conversion rate will depend on the going price of USDs and GBPs at that particular moment in time.

 

Use of the Term in Sentences

  • People can gain monumental profits by investing in Forex and having websites dealing exclusively in foreign exchange has made things fathomable and easy to participate in.

 

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