Firstly, there is no very basic distinction between online currency exchange/trading and the ordinary money-changer. Generally, both entities benefit from the spread. Spread is the left amount after subtraction between the buy-sell prices. Spreads between various institutions may differ relying on company policy. However, basically this is how this business goes.
Forex has its leverage mechanism. The existence of leverage, among others, is the most point or way in which physical exchange of money at the public money changer and forex trading are not the same. The mechanism of leverage allows buyer-seller to make high volume transactions with small investments. Thus, high gains can be achieved even in small movements in the transaction parity. The highest leverage ratio allowed in most country is 1: 100, which means that the investor can make a transaction with 100.000 USD with a guarantee of 1,000 USD. Yet, sometimes there are small broker offer higher leverage to attract consumers. The highest leverage offered by broker until this article published is 1 : 3000.
Another contrast between money changer and foreign exchange (FX) market is that the last is a bi-directional market. In physical market, we can only sell if we have goods (in this case, physical money itself). It is barely possibly to sell no money to changer office. On the other way, in order to benefit from the rise of an opposite currency pair, we may also make a sale transaction to take advantage of the decline as we do the buying transaction. For example, USD / TRY: 2.9000 level and we think it will drop by selling a sales process, we start to make profit at the moment when the parity starts to fall below 2.9000. Taking the resident producers in Turkey get out of raw materials bought dollars at time t, t + x is the risk of falling dollar prices at the time. Because the raw material at a low price can be purchased at a high price. In order to hedge against this risk, Forex markets have a sales position in USD / TRY parity so that even if the dollar falls, it gains a profit and avoids risk and is called a hedge.
Forex can be invested not only on currency pairs, but also on commodity products and indices such as gold, oil, copper and silver.
One of the major advantages of the FX market is the possibility to process data instantly. Forex market is open for 5 days and 24 hours. Therefore, currency can be dealed almost all the time (except when holiday). There is no opening and closing hours such as money changer office. Forex traders, for example, are expected to see a change of prime minister, resignation etc. when there is an unexpected event during the night. they can instantly evaluate the data and gain a change in the parity.
Forex markets are not physical. The physical delivery in the purchase-sale transactions is not applied. Traders do not need to take the high quantity of money to the changer office for trading. One can perform transactions by sending orders via the internet whenever and wherever he/she wants. When the investor wants to sell, the buyer finds the opposite because forex is the world’s largest financial exchange-market where daily sum of exchange overreach USD 5 trillion.