In currency trading when we refer to the term forex rates we directly refer to the rates one currency is exchanged for another; due to the simplistic fact that unlike other forms of trading in forex trading when we exchange currencies we need to go short in one in order to go long in another, simply said we must give up an x amount of one currency in order to receive a y amount of another.
The exchange process is clearly based on forex rates provided in the over the counter interbank exchange which is updated live in forex trading terminals, which in difference to the private banking sector updates on a constant basis during the hours the forex market is open.
The trades conducted in forex trading can be for recreational reasons, business reasons or speculative purposes but all have their foundations set down to acquiring a profit. This means that the constant trades executed over the network of sites and forex brokers that use the MT4 trading terminal or any other trading terminal makes the OTC interbank exchange a dynamic sector which has pressure and release from traders decisions all around the clock.
What this concludes to is that unlike normal forex rates which you might have seen outside banks or outside exchange centers when you trade forex online you have one main competitive advantage against trading currencies elsewhere and that is the fact that you are exposed to a dynamic market which allows rates to fluctuate more than 30 times a minute.
Foreign currency exchange rates have characteristics which no other form of trading posses as they are extremely vulnerable and at the very same time extremely dynamic with the ability to react to each and every reaction of the worldwide markets which might have resulted from an announcement, an interview, a political instability, a social crisis, a political crisis, various stock market indexes and an endless list of chained reaction forces that exert pressure on currency exchange rates. These characteristics are the main reason currency trading has become increasingly popular and widespread and is practiced by more and more private speculators and traders day after day.
As mentioned above the money exchange rates at which your local bank will exchange your Dollars, your Euros or any other currency is clearly different and more expensive than the rates you see at any online forex broker or at any online trading terminal; you must understand that when you are exchanging money at the bank you are doing so because you need an amount of a foreign currency and not because you are a speculative trader that benefits from the currency exchange rates and fluctuations.
This in no case means that you cant walk in to the bank and exchange all or part of your portfolio back and forth in to foreign currencies in order to capitalize on currency exchange rates but you must realize that due to the more expensive rates and the commissions bank’s charge to cover their operating expenses the practice is simply not worth it when your not exchanging enormous figures of money. You must understand that forex rates and money exchange rates are simply 2 different chapters of forex trading and they belong to 2 different categories which serve 2 different purposes.