Exchanging large sums of money can be risky given the potential for negative exchange rates as well as theft if physical cash is moved from one financial institution to another. For many, the best way to exchange large amounts of money is through the foreign exchange market because it’s a global marketplace for currency trading. This market is highly efficient and makes exchanging money a matter of a few mouse clicks.
Foreign Exchange Market
Forex is open 24 hours a day, five days a week, making it easy to exchange large sums of money when it’s most convenient. There is no centralized market for currency exchanges, meaning that individuals, banks and financial institutions trade in whatever financial market is open and supports currency exchanges. Although investors, day traders and speculators use Forex to make money from currency fluctuations, it’s still a viable method for exchanging large sums of cash. To exchange currency on Forex, you need to visit its website and open an account. The site lets you open a free practice account to get comfortable with the system before opening a real account.
Seven Major Currency Pairs
The basic unit of exchange on Forex is a currency pair, which is comprised of two currencies that are bought and sold together. This makes it easy to exchange large sums of money for various types of world currencies, without the hassle of having to initiate wire transfers and manual exchanges at financial institutions. Most Forex platforms come with tools for monitoring spot prices and market conditions, helping to optimize the exchange process.
Exchanging money on Forex comes with inherent risks, because world currency prices are constantly changing. The spread between currencies in a currency pair is measured in percentage-in-points, which fluctuates based on the condition of financial markets, global economics and political strife. The seven most commonly traded currency pairs on Forex all contain the U.S. dollar, but there are many other currency pairs that don’t. These other currency pairs may be more volatile, posing additional risks while exchanging funds.
A number of brokerages and financial institutions provide online platforms for exchanging currency, including Forex.com. These platforms provide buy and sell prices, charts for trend analysis and economic reports to help with exchange decisions. Banks, hedge funds and traders use these types of platforms to speculate in currencies, trying to generate returns for their clients or themselves. Despite the risks associated with buying and selling currencies on Forex, it’s one of the best ways to exchange large sums of money.
Joseph DeBenedetti is a financial writer with corporate accounting and quality assurance experience. He writes extensively online with an emphasis on current trends in finance. As a Quality Assurance Analyst, he honed his technical writing skills creating standard operating instructions for a consumer finance organization.