The what and how of Foreign Exchange
Foreign exchange transaction, in short, is the process of exchanging one cur- rency for another. Such an exchange of supply and demand holds opportuni- ties for investment, but is also accompanied b...
Investment4 May 2023
Article image
Read More

Foreign exchange transaction, in short, is the process of exchanging one cur- rency for another. Such an exchange of supply and demand holds opportuni- ties for investment, but is also accompanied by risks.

Facing such a huge foreign exchange market, what requires our special attention? How to conduct our trading?


What is foreign exchange? How to trade?

A simple and practical way of understanding foreign exchange transaction is that when you travel abroad, you will naturally need to convert the currency of one country into a local currency before you can use it.

But of course, foreign exchange transaction is not just about exchanging foreign currency for travel. In financial markets, it can also be a channel for individuals or companies to invest, hedge, and make profit. As many investors trade foreign exchange for profit, amount of currency traded each day can be considerable. For any investor who wants to participate in the market, it is an investment opportunity with relatively low entry barriers.

Similar to stocks or other investment methods, in foreign exchange transaction, investors make profit by buying low and selling high through fluctuations in the exchange rate.



What are the benefits of foreign exchange transaction?

After you understand what foreign exchange transaction is and how it works, you might wonder what the benefits are.

1. Trading 24 hours a day
The foreign exchange market trades continuously 24 hours per day, 7 days a week. You can seize the moment by making trades any time of the day or night

2. High liquidity
Since foreign exchange transaction is fast to buy and sell, the liquidity is high, and a large amount of funds can be quickly converted in a very short period of time

3. Relatively low transaction costs
The most important part of the transaction cost of foreign exchange is the price difference between bid price and asking price, which foreign exchange broker can earn during the transaction.

The foreign exchange difference is measured by "Pip". Most currency pairs are priced out to four decimal places. For example, if the bid price is 1.2843 and the asking price is 1.2848, then the price difference is 5 pips.

4. Both rising and falling prices have profit potential
Since there are no restrictions on directional trading in the foreign exchange market, if you think a currency will appreciate, you can buy more; on the other hand, if you think it will depreciate, you can sell it immediately.


Exchange Foreign Currency Nowon DBS iBanking

Download DBS digibank HK appto enjoy the convenience of 24x7 real time FX Trading Service

Risk Disclosure and Important Notice

Foreign exchange involves risks. Customers should note that foreign exchange may incur loss due to the fluctuation of exchange rate.

RMB currently may not be freely convertible and is subject to exchange controls and restrictions. There is no guarantee that RMB will not depreciate. If you convert Hong Kong Dollar or any other currency into RMB so as to invest in a RMB product and subsequently convert the RMB sale proceeds back into Hong Kong Dollar or any other currency, you may suffer a loss if RMB depreciates against Hong Kong Dollar or other currency.


Explore more

Wealth FeedGlobal
Disclaimers and Important Notices

The information published by DBS Bank Ltd. (company registration no.: 196800306E) (“DBS”) is for information only. It is based on information or opinions obtained from sources believed to be reliable (but which have not been independently verified by DBS, its related companies and affiliates (“DBS Group”)) and to the maximum extent permitted by law, DBS Group does not make any representation or warranty (express or implied) as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions and estimates are subject to change without notice. The publication and distribution of the information does not constitute nor does it imply any form of endorsement by DBS Group of any person, entity, services or products described or appearing in the information. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment or securities. Foreign exchange transactions involve risks. You should note that fluctuations in foreign exchange rates may result in losses. You may wish to seek your own independent financial, tax, or legal advice or make such independent investigations as you consider necessary or appropriate.

The information published is not and does not constitute or form part of any offer, recommendation, invitation or solicitation to subscribe to or to enter into any transaction; nor is it calculated to invite, nor does it permit the making of offers to the public to subscribe to or enter into any transaction in any jurisdiction or country in which such offer, recommendation, invitation or solicitation is not authorised or to any person to whom it is unlawful to make such offer, recommendation, invitation or solicitation or where such offer, recommendation, invitation or solicitation would be contrary to law or regulation or which would subject DBS Group to any registration requirement within such jurisdiction or country, and should not be viewed as such. Without prejudice to the generality of the foregoing, the information, services or products described or appearing in the information are not specifically intended for or specifically targeted at the public in any specific jurisdiction.

The information is the property of DBS and is protected by applicable intellectual property laws. No reproduction, transmission, sale, distribution, publication, broadcast, circulation, modification, dissemination, or commercial exploitation such information in any manner (including electronic, print or other media now known or hereafter developed) is permitted.

DBS Group and its respective directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned and may also perform or seek to perform broking, investment banking and other banking or financial services to any persons or entities mentioned.

To the maximum extent permitted by law, DBS Group accepts no liability for any losses or damages (including direct, special, indirect, consequential, incidental or loss of profits) of any kind arising from or in connection with any reliance and/or use of the information (including any error, omission or misstatement, negligent or otherwise) or further communication, even if DBS Group has been advised of the possibility thereof.

The information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. The information is distributed (a) in Singapore, by DBS Bank Ltd.; (b) in China, by DBS Bank (China) Ltd; (c) in Hong Kong, by DBS Bank (Hong Kong) Limited; (d) in Taiwan, by DBS Bank (Taiwan) Ltd; (e) in Indonesia, by PT DBS Indonesia; and (f) in India, by DBS Bank Ltd, Mumbai Branch.