How it works
A currency exchange converts one currency balance into another for spending, saving or settlement. Forex trading usually means taking market exposure with the aim of benefiting from a price move, often through a leveraged derivative.
What to check
Compare the purpose, settlement method, fees and whether the user ends up owning the currency. A bank conversion, remittance transfer and leveraged broker position can all reference the same exchange rate but work very differently.
- Ask whether you own the currency
- Separate conversion fees from trading costs
- Check for leverage
Limits and risks
Confusing the two can hide leverage and financing risk. A small exchange-rate movement that barely affects a cash conversion can have a much larger effect on leveraged trading capital.
Primary sources
BIS 2025 Triennial Central Bank Survey↗FCA: Contracts for difference (CFDs)↗General information only. Investment products can lose value, and terms, fees and regulation can change.