You may have noticed that currency brokers talk a lot about buying and selling foreign currency. But what do these terms mean exactly and what is the difference between them?
It is actually pretty simple. Clients who’re buying and selling foreign currency always exchange one currency for another. For example you might be starting with sterling and wish to take advantage of a good exchange rate to receive euros. Hence when you make the exchange you’re selling the currency you start with (sterling) to receive another (euros).
This happens because all currency exchanges involve a currency pair. Clients must sell one currency to take advantage of the exchange rate when they buy another. This is why when you consider the exchange rates the currency pairs are displayed GBPEUR or GBPUSD. In both these cases the client would sell sterling to receive another currency.
And that’s it! Now when currency brokers talk about buying and selling foreign currency you’ll know exactly what they mean.