When to Use a Foreign Exchange Converter
When you look into the forex market you will see websites offering the use of a foreign exchange converter. Many new traders become confused about when they should be using a converter. There are times when you can use a converter, but the forex converter is not actually a tool that many traders use. There are a number of reasons for why this is not used. It is important that you know whether you should use this tool and why you should not.
What is a Foreign Exchange Converter?
Before you are able to see whether you should use a converter you have to understand what it is and what it does. This is a piece of software that many websites offer which tells you the current market price for a currency pair. You are able to select the currencies you want to convert from the listing that the software has. Not all converters will have all the currencies as some of them only have the major currencies.
A lot of converters also have graphs and market insight included. These graphs are generally simply line graphs that show the overall market trend for the currency pair you are looking at. The insight you get could be for only the major currencies and can be outdated depending on the converter you are using.
Who Converters are for
There are certain people that the converter was created for and certain people who should not use the converter. These items were not created with the forex trader in mind. They were created with the average person and companies in mind. The average person can use these items to find out exchange rates for personal reasons such as travel and purchasing goods in another country. Companies generally use these items to see how much it would cost them to buy something from another country.
When Traders can Use Converters
The best time for a forex trader to use a currency converter is when they are looking at different brokers. You can use the converter to see what the market price for a currency pair is and then compare the price brokers are offering to this. Doing this allows you to determine who offers you the best spreads on certain currency pairs. Of course, when you do this you have to find out whether the brokers are offering you fixed or variable spreads.
When Not to Use Converters
There are certain times when a forex trader should not use a converter. When you are planning your trades is one of these times. The price you get from the converter is likely to differ from the price you get from your broker. This can cause problems in your trade calculations and you may expect greater profits than you are going to get.
You should also stay away from converters when you are analysing the market. Your analysis should be done using either forex charts or fundamentals. If you use the charts or insight provided by the converter you may analyse the market incorrectly and suffer losses on the trades.