How to Foreign Exchange Work 

Foreign Exchange rate was once just something that people had to do when traveling to other countries. They would exchange some of their home country's currency for another and endure the current currency exchange rate.

These days, when you hear someone refer to foreign exchange trading, they are usually referring to a type of investment trading that has now become common. Traders can now speculate on the fluctuating values of currencies between two countries.

You Know About Foreign Trading  

Foreign exchange (forex) trading is buying or selling one currency in exchange for another, in an attempt to extract a profit from the price movements. All currency trades involve two currencies, and trades are facilitated by a forex broker. Currency markets are open 24-hours a day during the week, which is an advantage over the stock market which is only open for a portion of each week day.

This makes it an attractive option for new traders starting out with limited capital (leverage increases the "buying power" of the trader's capital). That said, there are also risks that forex traders need to be aware of, as well some basic information they should know before starting.

These articles provide an overview of these crucial basics, including what a currency pair is, currency pair symbols, trading hours, position sizing and pip values, how profits are made, leverage, capital requirements for trading, forex brokers and trading fees.

Currency Pairs in Forex Trading

Any forex trade actually involves two currencies. If you are going on a trip to Europe, you take your US dollars and exchange them euros. That's a currency transaction—exchanging one currency for another. Forex traders do the same thing, except they are attempting to profit from changes in the prices of the currencies.

Currencies are always quoted relative to one another, called a pair. For example, the EUR/USD is the price of US dollars relative to euros.

1 US Dollar equals.     

0.82 Euro

1 Euro equals

1.22 US Dollar

How to Calculate an Exchange Rate

Calculating exchange rates may seem simple on the surface, but it can be confusing to those that don't remember mathematics from school. While converting $100 to foreign currency when traveling isn't a big deal, converting currencies when analyzing a foreign stock's financial statements can mean big differences for international investors trying to make investment decisions

Suppose that the EUR/USD exchange rate is 1.20 and you'd like to convert $100 U.S. dollars into euros. To accomplish this, simply divide the $100 by 1.20 and the result is the number of euros that will be received - 83.33 in that case. Converting euros to U.S. dollars involves reversing that process by multiplying the number of euros by 1.20 to get the number of U.S. dollars.

An easy way to remember this is to multiple across left-to-right and divide across right-to-left, with the ending currency being the desired output of the calculation

In the example above, we divided across right-to-left to determine how many euros we could purchase with U.S. dollars and then multiplied across left-to-right to see how many U.S. dollars we'd receive from euros.

Travels may only be interested in calculating to a relatively low degree of accuracy, such as cents, but currency traders that are highly leveraged pay attention to each pip. A small fluctuation in a currency can have a big impact for a trader that has borrowed $1,000 for each $1.00 committed to a trade or an international investor determining the impact of a $0.0001 difference on $1 billion in revenue.

Currency Exchange Procedure and Documents 

1. Do you require to give a copy of your passport or visa for exchanging USD / INR or any other currency into Lankan Rupees at a Bank or any money changer ? 

2. are you expected to show your original passport as well when exchanging foreign currency or otherwise generally travelling around in sri lanka? i m planning to carry extra copies of my passport and not risking taking my passport everywhere.

3. I have small amounts of swiss francs, Euros, singapore dollars, UAE Dirhams and hongkong dollars from my earlier trips to these countries. which of these i can use to directly purchase lankan rupees or should i get all of them converted to USD again to take to SL (which means one more round of commission and charges)