With so many Forex charts today, most traders seem to have forgotten the existence of a currency converter in their trade. This is definitely a bad move considering just how useful this particular piece of tool is in making profitable decisions.
What is a currency converter?
As the name suggests, a currency converter lets a person find out how much a currency would cost in a different denomination. For example, if an American were to go to Japan, they will need the Japanese Yen to start buying items in the country. The currency calculator will let the American know exactly how much their dollars would cost when converted to Japanese Yen, therefore allowing them to make accurate payments for purchases.
How is this useful for Forex?
The Foreign Exchange market basically operates on currency pairs such as the American Dollar and the Euro. The currency converter works by providing traders with an accurate estimate of how the USD fares against the dollar. For example, 1 USD is equal to 1.5 Euro at the time of a person’s purchase of 5 USD worth of Euro. Using the currency calculator, this means that the trader managed to buy 7.5 worth of European currency.
Now, let’s say the Euro’s value increased, resulting to 2 Euros for every 1 USD. The increase in the value of the Euro will be reflected in the converter and may trigger the trader’s decision to sell. During the time of the sale, the value of the Euro will be much larger, providing the trader with instant 2.5 USD in profit.