A:

All currencies are quoted in pairs - one country's currency against another country's currency. A currency converter is used by traders to check the current exchange rates between two chosen currencies. You'll find that most currency traders will use price charts to determine the direction of any given pair. A chart shows the price (or exchange rate) of the currency pair, which plotted on the y axis, over the time period, which is plotted on the x axis. A chart can be constructed for any time frame - from months, weeks, and days to hours and minutes; it can provide the trader with a historical perspective on the range of exchange rates over a period of time.

Chartists believe certain repeatable patterns allow them to gain an edge in determining the future movement of rates. Thus, when a currency trader wants to buy or sell a currency, he or she will use a chart for guidance to determine the likely currency rates in the future. Chart patterns, areas of support or resistance, and the consequent trading range within which a currency may fluctuate all factor into speculation on future rates. Once trends on future rates are decided upon, a trader will turn to a currency converter to determine the current rate of exchange.

A trader's use of a currency converter is similar to the need for any visitor to another country to physically exchange the currency of his or her home country for that of the host country. He or she will have to refer to a currency converter to obtain the current rate of exchange. When the trader finally converts the currency from his or her local currency into that of the country being visited, he or she will have to pay whatever rate is being charged by the local bank.

(For more on this topic, see Forces Behind Exchange Rates.)

This question was answered by Selwyn Gishen.

RELATED FAQS
1. ### What is foreign exchange?

Foreign exchange, or Forex, is the conversion of one country's currency into that of another. In a free economy, a country's ... Read Answer >>
2. ### Why isn't the EUR/USD currency pair quoted as USD/EUR?

In a currency pair, the first currency in the pair is called the base currency and the second is called the quote currency. ... Read Answer >>
3. ### Why is the U.S. dollar shown on the top of some currency pairs and on the bottom ...

All currencies are traded in pairs. The first currency in the pair is called the base currency while the second is called ... Read Answer >>
4. ### How do you make money trading money?

How someone makes money in forex is a speculative risk: you are betting that the value of one currency will increase relative ... Read Answer >>
5. ### How are international exchange rates set?

International currency exchange rates display how much one unit of a currency can be exchanged for another currency. Currency ... Read Answer >>
6. ### How often do exchange rates fluctuate?

Exchange rates float freely against one another, which means they are in constant fluctuation. Currency valuations are determined ... Read Answer >>
Related Articles

### Drastic Currency Changes: What's The Cause?

Currency fluctuations often defy logic. Learn the trends and factors that result in these movements.

### What Happens in a Currency Crisis?

A currency crisis comes from a decline in the value of a countryâ€™s currency.

### How to Calculate an Exchange Rate

Struggling to get a grasp on exchange rates? Here's what you need to know.
4. Investing

### Explaining Fixed Exchange Rates

A government using a fixed exchange rate has linked the value of its currency to the value of another countryâ€™s currency, or the price of gold.

### Forex Trading: A Beginner's Guide

Learn about the forex market and some beginner trading strategies to get started.

### Interest Rate and Currency Value And Exchange Rate

In general, higher interest rates in one country tend to increase the value of its currency.

### Top 5 Reasons To Invest In Currencies

Here's why you should get into the forex market.
RELATED TERMS
1. ### International Currency Converter

An electronic program that allows for the quick conversion of ...
2. ### Currency History

The historical values of a base currency in relation to the values ...
3. ### Currency Pair

The quotation and pricing structure of the currencies traded ...
4. ### Historical Currency Exchange Rates

A collection of historical exchange rates that are used to provide ...
5. ### Cross Currency

A pair of currencies traded in forex that does not include the ...
6. ### Currency Pairs

Two currencies with exchange rates that are traded in the retail ...
Hot Definitions
1. ### Backward Integration

A form of vertical integration that involves the purchase of suppliers. Companies will pursue backward integration when it ...
2. ### Pari-passu

A Latin phrase meaning "equal footing" that describes situations where two or more assets, securities, creditors or obligations ...
3. ### Interest Rate Swap

An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for ...
4. ### Custodian

A financial institution that holds customers' securities for safekeeping so as to minimize the risk of their theft or loss. ...
5. ### Supply Chain

The network created amongst different companies producing, handling and/or distributing a specific product. Specifically, ...
6. ### In The Money

1. For a call option, when the option's strike price is below the market price of the underlying asset. 2. For a put option, ...