FX Glossary - Getting the best currency exchange rate
January 23, 2024
Over the last 30 years operating a currency exchange and precious metals business, and transacting over $5 billion in transactions, we’ve learned that sharing our knowledge around money exchange and forex rates is helpful for the businesses and individual clients we serve.
Everyone wants the best currency exchange rate, whether planning a trip, getting paid in USD or paying a foreign vendor, but many individuals and businesses are unfamiliar with what is involved in the process. This becomes even more important as we look for efficiencies in our spending power especially when dealing with transactions electronically.
We’ve put together a glossary of forex terms covering the currency exchange process that is helpful when looking for the best rate. This FX glossary applies to common exchanges between USD and CAD, CAD to USD, Euro and CAD, and across the other 80+ currencies we work with.
The top 10 currency exchange terms defined:
- Forex (Foreign Exchange): The global marketplace for trading national currencies against one another.
- Currency Pair: The two currencies involved in a foreign exchange transaction, such as EUR/USD (Euro/US Dollar).
- Base Currency: The first currency in a currency pair, against which the exchange rate is quoted.
- Quote Currency: The second currency in a currency pair, in relation to which the exchange rate is quoted.
- Exchange Rate: The rate at which one currency can be exchanged for another.
- Bid Price: The bid price is what the dealer is willing to pay for a currency.
- Ask Price: The ask price is the rate at which a dealer will sell a currency.
- Spread: The difference between the bid and ask prices.
- Forward Contract: An agreement to buy or sell a currency at a future date at a predetermined exchange rate.
- Hedging: A strategy used to reduce the risk of adverse price movements in the forex market.
People also ask VBCE Forex Traders: What is the significance of Bid Price and Ask Price in forex trading?
Bid Price and Ask Price are crucial concepts in forex trading. The Bid Price represents the maximum amount a dealer is willing to pay to purchase a currency pair, while the Ask Price is the minimum amount a dealer is willing to accept to sell that pair.
The difference between these two prices is known as the spread, which essentially represents the transaction cost to the client. Understanding Bid and Ask Prices is essential for making informed trading decisions, as it helps determine the entry and exit points for a trade. Traders buy at the Ask Price and sell at the Bid Price, and the Bid and Ask Prices constantly fluctuate based on market demand and supply. You will find VBCE’s spreads much lower than the bank and our competitors.
Exchanging currency at VBCE follows the same process and FINTRAC regulations as your commercial bank, such as CIBC, TD, or RBC. Our advantage for customers is that you can speak directly to our trader to get advice on how to most efficiently transfer funds and confirm a better exchange rate of up to 3% compared to banks.
Questions? Email us at info@vcbe.ca