How do money changers make money?

How do money changers make money? (as in, big money)?

• I know a little bit about how they earn money from the fluctuations in the exchange rate, and the different rates at which they charge people. However, all the money changers have rates that are so competitive and so close to each other, and how can we know how much of the foreign currencies they are holding? (to make the money that they should)

• Answer:

  The revenue comes from the differential between the buying price and selling price. while the differential is small, the volume of trade tends to be very large. The small difference between the buying and selling price adds up to a lot of money when millions of dollars worth of currencies change hands every day. Another way they make money is through speculation. they analyze the various markets and decide which currency will go up or down, and they buy and sell those currencies in the hope of reaping a profit if their analysis is correct. Finally, they can also make money through arbitrage, which is the simultaneous buying an selling of a currency in two different markets. For example, the Euro is quoted at $1.4551 in London but $1.4552 in New York. The arbitrageur buys 10 million Euros in London and simultaneously sells the same amount in New York, earning $.0001 per Euro or $1,000 in a few minutes.