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Glossary

Conversion rate

Definition

Rate at which transfers and profits/losses from trades are converted into the base currency of the account, based on the day's prevailing exchange rate.

What is a conversion rate? 

In finance, the conversion rate typically refers to the ratio at which one currency can be exchanged for another. It can also apply to the rate at which one type of financial instrument can be converted into another, such as bonds into stocks.

Why is conversion rate important to consider when trading? 

The conversion rate is crucial in currency trading (forex) as it directly impacts the profitability of currency exchange transactions. For traders dealing with international investments or companies with global operations, understanding conversion rates is essential for evaluating investment returns and managing currency risk. Changes in conversion rates can significantly affect the value of investments in different currencies.

Related Items

Counter currency Base currency Currency trading Exchange rate
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