Forex rates can be referred to as the amount of currency which needs to be given up in order to obtain a different currency usually from a different country or region. The world is dynamic and it cannot trade with a single currency hence the need to always convert from one currency to the other in order for a business to be hitch free. In converting these currencies, several times, the forex rates are considered.
The forex rates can either be flexible or fixed. While the flexible forex rates usually follow after what the forex trader think the currency is worth, the fixed exchange rate is when a country's currency doesn't vary according to the forex market. The country makes sure that its value against the dollar, or other important currencies, remains the same.
While there are different forex rates available on the market it is quite a cumbersome task to pinpoint one which is the best. These forex rates are sometimes determined by brokers for reasons best known to them and what may be regarded as best to you will probably not be held in high esteem by others. Factors which bring about a difference in the forex rates are explained below in no order of importance.
a. THE SPREAD:
The difference that exists between the bid and the asking price of a security or asset is known as the spread. This usually an option established by purchasing one option and selling another option of the same class but of a different series. The spread is affected by a number of factors such as the supply or float and the demand or interest in a stock.
In the forex market, there are three forms of commission that are used by the brokers. While some offers a fixed spread, others make it variable and some others still prefer to charge a commission based on a percentage of the spread. Commission charges normally differ from one broker to the other and to some extent affects the forex rate.
In most cases, it is actually hard to find a rate that can be described as the best for trading currencies as a result of the reasons mentioned above. Studying a broker before signing up with him or her can lead a trader to one of the best forex rates. Having known these, the best forex rates should, therefore, have the following characteristics or meet the following requirements.
a. The commission rate in relation to others must not be too high.
b. The spread must be kept as moderate as possible.
c. It should not have some hidden charges.
d. It must be flexible and favors the buyer and the seller.
e. It should a wide range of exposure should stand the test of time.
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