This explanation is a drop in the bucket. Instead, you must first trade these for Saudi Riyal at the present exchange rate.
This exchange rate changes all the time, so if, moments after the transaction is complete, the Dollar drops in value and the Riyal rises, the seller ended up with the better end of the deal than the buyer.
These kinds of exchanges are happening constantly, on the international level and on the individual level. These trades, big and small, are going on all the time, but without any centralized market. Nations and huge institutions trade currencies on a mammoth scale, in anticipation of events that will change the value of these currencies in their favor, to hedge, and to accomplish other complex financial ends.
This is called the Spot Market of Forex trading, and involves the actual dollars and cents being traded. This differs from the Futures market, where traders are buying a contract to specific currency behavior, essential speculating or betting on whether the underlying currency will fall or rise in value, without actually owning that money.
As an individual, you can get on board, trading the underlying asset value of currencies against certain odds, called leverage. Forex futures trading is inherently speculative by nature. There are myriad factors that go into the flighty value of all international currencies. It is hard, well-nigh impossible, to anticipate with any certainty what any one currency is going to do at a given moment. But good Forex traders nonetheless make it happen, at least often enough to run a tidy profit.
Forex is more art than science. It takes experience, high risk tolerance, and luck. But there are those who master this form of investment and have made it a career, or at least a side hustle. If you are interested, you can learn how to trade Forex through many sources. When you get the hang of it, you can actually make a decent amount. Modest Money is designed to provide entertainment and information to investors and those who would like to learn about the market, personal finance, loans and more.
You should never use the information on Modest Money as investment advice. We simply don't have enough information about you, your unique portfolio, nor your goals to provide investment advice. When making investment and other financial decisions, there is one piece of advice we can give you! Do your own research and think about discussing your opinions with a local, registered advisor!
Find out which brokers you need to avoid. Receive our exclusive report for free today. Learn to trade smarter! By Adam March 19th, Categories: Why Dividend Growth Investing Works. Investing for the Long Term: How a Catalyst Turns into Dollar Signs.More...