State which currency is being bought, what you are paying with, and what will happen if its rate falls.
FX means foreign currency. An exchange rate describes how many units of one currency equal one unit of another currency.
In the pair USD/ILS the dollar is the base currency and the shekel is the quote currency: the number tells how many shekels one dollar costs. EUR/USD shows how many dollars one euro costs. A rise in the pair means the base currency strengthened relative to the quote currency. FOREX is the foreign exchange market; converting money for travel is not the same product as trading leveraged derivatives.
For example only, USD/ILS = 3.60: buying 100 dollars costs 360 ₪ before costs. If the rate falls to 3.40, the same 100 dollars are worth 340 ₪.
State which currency is being bought, what you are paying with, and what will happen if its rate falls.
In a fictional exercise, the exchange rate is three units of currency A for one unit of currency B. An amount of 300 in A therefore buys 100 in B before fees. If the rate changes to four, the same amount buys only 75 units. Label both currencies in every calculation. A larger displayed number does not necessarily mean more money: the unit and conversion direction determine its meaning.
Concepts that help you compare
Spot rate, buy rate and sell rate
The quoted (spot) rate is an informational indicator. It is not a promise of the price at which a bank or currency service will execute a transaction. A provider may quote a different rate when selling you currency than when buying it from you. The gap is called the spread, and sometimes there is also a commission. Therefore check how much you actually pay and how much you actually receive, not only the headline “no commission.” Yahoo rates shown on a website are market data, not the Bank of Israel’s quoted rate nor a binding commercial offer.
Comparison example: Example: the provider sells you a dollar at 3.70 ₪ and buys it back at 3.60 ₪. Converting 100 dollars there and back at those rates costs 10 ₪, even without a market move and before any additional commission.
Currency risk is a change in value because of an exchange rate movement. Leverage increases exposure relative to the money invested. A currency can strengthen or weaken due to interest rates, expectations, trade and events, without being predictable with certainty. In leveraged trading a small move can cause a large loss and even exceed the initial amount depending on the product. A derivatives account is not the same as simply holding a currency. In the workbook we practice holding without leverage: you pay the full cost in shekels, there is no loan and no selling of currency not held in the portfolio.
Comparison example: In this exercise only, a stock priced in dollars rose 10%, but the dollar fell 10% versus the shekel: 1.10×0.90=0.99. The value in shekels fell by about 1% before costs, despite the stock rising.