Foreign exchange rates are the buy and sell price of the world’s currencies. Forex rates are constantly changing. These changes are usually small movements unless the market is going through a particularly volatile period.
Currencies on the foreign exchange market are traded in pairs. When you buy a particular currency you are selling another. The price of buying one currency and selling the other is the rate of exchange or Forex rate. The rate is affected by supply and demand. The higher the demand for a currency means the price for it also rises. For example, looking at the EUR/USD currency pair, if more people are buying (for example) the US dollar then there is increased demand and therefore less supply in the marketplace. This pushes up the value of the dollar against the euro.
Commodities like gold, silver and oil are exchanged in the Forex market in the same way as currencies. They are commonly traded against the US dollar. Often (though not always), gold and the USD have an inverse relationship – when one drops the other rises and vice versa. Because of this relationship, gold as an investment is often used as a hedge against the USD.
Forex rates and the market maker
Forex market makers provide online platforms for the individual to trade currencies. As a market maker, easyMarkets has real-time rates that are constantly updated to accurately reflect the market. Customized currency rates tables allow Forex traders to select which currencies they wish to have visible as they trade. A cross currency matrix shows up-to-the-minute rates of all currencies available for trade on the easyMarkets webtrader platform.
Making the most of rate volatility
The Forex market goes through periods of volatility where Forex rates can make dramatic shifts, such as the January 2015 Swiss National Bank rate pegging cut, and the June 2016 UK Brexit decision. These times offer great opportunities for Forex currency trading. But these sharp shifts in Forex rates can also be risky. Correctly anticipating the rise or fall of a particular currency and its subsequent purchase or sale will lead to profit. However, many factors should be taken into consideration. Why is the currency on the rise? What has happened in the market to trigger this rise? How long is it likely to last? Is it a correction – a move back to what is a more realistic rate of exchange for this particular currency pair? The trader should consider these questions and make well-informed trading decisions.
Stay informed of Forex rates
Prudent trader’s stay informed of the financial markets. Regular market updates, news feeds direct into the platform and a financial calendar of economic indicators and new high/low push notifications are just some of the tools available to traders with easyMarkets.