Forex Information - The World Makes The Forex Market Go Round (Part 3)

Consisting primarily of world wide network interbank traders who are connected together by computers and telephone lines, forex traders are incessantly negotiating prices among one another. These artful negotiations normally ensue in a market bid, or asking price, for a specific currency which is then introduce continuously into computers to be displayed on official quote screens. When the forex exchange rates are quoted between banks, this is called “Interbank Rates.”

The foreign exchange spreads are when the exchange rates in the forex market are cited as a two tier “bid” or “ask” rate. For instance, when a USD and a DEM is cited as 1.6000/15, the forex trader who cites this exchange rate is agreeing to buy the DEM’s at 1.6000 and sell them at 1.6015. The “spread” is the actual difference between cites of purchase and cites of sale and also illustrates the profit expected from the transaction for the forex trader. The “spread” may vary comprehensively on any specific currency, all depending on the currency’s strength or weakness, and even it’s past history or prospective volatility.

Many individuals may not be able to get hold of some foreign currencies at forex rates unless they become licensed traders through forex. Instead, those individuals may be able to come across foreign currency through a commercial bank, which may charge the individuals with either a commission or a higher spread than those reigning in the forex market. Sometimes these commercial banks will even charge individuals both commission and higher spread as to enable the bank to make a reasonable profit from the transaction.

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