Financial Terms / foreign exchange

Foreign Exchange: Global Financial Market

Foreign exchange is a global market of immense proportions, exchanging an incredible $5.3 trillion per day in different currencies.


Foreign Amount x Exchange Rate = Amount in Home Currency

How do I calculate the foreign exchange?

It is recommended to use the multiplier or divisor method when calculating foreign exchange. To calculate foreign exchange with the multiplier method, use the formula:  Foreign Amount x Exchange Rate = Amount in Home Currency, and with the divisor method, use the formula: Foreign Amount / Exchange Rate = Amount in Home Currency. For more complex calculations, it is best to use a program such as Sourcetable.

What is Forex?

Forex is the abbreviated term for Foreign Exchange, which refers to the global market where currencies are traded. It is primarily the domain of large financial institutions, multinational corporations, and hedge funds.

What is a Pip?

A Pip is a fraction point, and it is the smallest unit of measure to track profit and loss in the Forex market. It is the last decimal point of a price quote, typically 0.0001 for most currency pairs.

How do I calculate Pips?

You can calculate the value of a pip by using the following formula: pip value = (1 pip / exchange rate) * lot size

Key Points

How do I calculate foreign exchange?
Foreign Amount x Exchange Rate = Amount in Home Currency
The Foreign Exchange Market
The foreign exchange market is an over-the-counter global marketplace that trades currencies. It consists of banks, forex dealers, commercial companies, central banks, investment management firms, hedge funds, retail forex dealers, and investors.
The Largest Financial Market
The foreign exchange market is the largest financial market in the world and is open 24 hours a day, 7 days a week. It is also known as the forex, FX, or currency market, and it is where traders and investors exchange currencies.
Facilitating Currency Conversion
The foreign exchange market facilitates currency conversion for international trade settlements and investments.

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