The process of trading one country's money for another's money is called foreign currency exchange. Any individual that is planning a trip in a country that does not except their money will need to do an exchange. The traveler will have to do a monetary conversion if they intend to make any purchases, or do any transactions.

An individual has several choices, when doing an exchange, such as, using cash, ATM machine or traveler's checks. You want to maximize on the rate, for example, you want your home currency to stretch, so that you will have more purchasing power. The rate will vary, based on the global economy. There are many things that have an impact on the rate, for example, the monetary policy of the government, interest rates and the stability of the government. Financial institutions and banks are equipped to hold different types of money and keep until they can get a better rate.

The value of the currency of a country shows its status in the global market. For instance, if a country has rumors of a war, the value will begin to go down because of the instability. A country that has a strong international influence, will not see its money impacted so greatly.

A primary function of the exchange is to promote the compatibility of money across international lines. The market is the facilitator of investing and trading. The way the money can increase and decrease, puts it inline with the rules of supply and demand.

This is an international market that operates on a 24 hour basis. Currency is always being traded somewhere, however, the main centers for trading, such as Tokyo, London and New York, are open during the week. You can actually see the rate fluctuate, all day and all night.

There are also, different types of currency exchange. Some of the most common are, spot, future, forward, options and swap. A spot is a particular transaction with a delivery in a couple of days involving a contract instead of cash. A future is contract with a specified rate, that is set three months in advance. A forward is a type of future with less structure and a more flexible date.

Options is when the trader, negotiates for an open end forward, where the seller can decide to sell on a specified date or not, depending on market conditions. This involves, two traders, mutually agreeing to do a swap for a specific amount of time and then swapping back.. Options trading yields the most money but swapping is the most common.