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.

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