Risk Strategies

When looking to exchange currency there are a number of different options open to you as there are different types of contract and different types of market orders.

The main  types of contracts are Spot , Forward , Limit and Stop contracts all of which  can  be very useful in their own right depending on your circumstances.

Spot Contracts

Is a  straight forward exchange of currency to be delivered immediately. Spot contracts are used by individuals and businesses requiring immediate foreign currency, the standard turn around for a spot contract is two working days but can be the same day if specified.

For example Mrs Jones is buying a property in Spain, and she needs to pay a deposit on the property immediately. She books a spot contract for same day value after registering online, instructs her bank to make a CHAPS payment to the foreign exchange brokers client segregated account and as soon as the funds are cleared the Euros are sent to the clients desired account.

Forward Contracts

Fix a competitive rate of exchange to hedge (minimise) future currency risk. A forward contract allows you to guarantee a rate of exchange for up to 24 months. This has a number of advantages, one being that it allows you to lock in an advantageous rate now for the future and also allows you to budget exact amounts required for the future.  When booking a forward a margin (deposit) is required to hold the transaction . As standard the deposit is 10% of the overall trade. The remaining 90% is paid when you require the exchanged funds to be sent out.

Stop Loss Order

This enables you to set a minimum rate at which the desired currencies are exchanged while leaving the opportunity of getting a better rate if the market moves in your favour but ensures a specific rate.

For example someone looking to buy Euros and the current rate is 1.14 but is looking to get 1.16, you could place a stop loss order at 1.13 meaning that if the market moves downwards you are guaranteed to get 1.13 but if the market moves to 1.17 you are able to cancel the order and take the higher rate.

Limit Order

This order enables a an individual or business to set a target exchange rate at which point, if reached, currency will be purchased. This is a good idea in market that is expected to  move in the right dection, it does however leave open for potential downward movement.

Both Stop loss and limit orders are they are placed into the market and will automatically purchase the desired currency when  it touches the specified rates day or night, 7 days a week. This enables the client to take advantage of overnight and spike movements.