Target an Exchange Rate
The currency markets are very volatile but it is possible to secure an exchange rate above the current market levels should you not be under time pressure to make a transaction.
Some business deals may rely on a specific price and with that comes the need to achieve a certain exchange rate and this is where a Market Order can help. This option executes when the exchange rate becomes available in the market. To ensure you react at the right time, you’ll need expert guidance as markets need tracking in real-time.
A market order will instruct NewbridgeFX that you want to achieve a certain exchange rate in the future and so, we work on your behalf, monitoring and tracking the currency markets waiting for the moment to arrive, ensuring you take action at the correct time. This will ensure that the exchange rate is secure for the agreed amount. But, it is important to understand that the exchange rate is not guaranteed, and the rate can only become booked should the market reach the desired level.
Market Order Options
Speak to a specialist at NewbridgeFX to discuss the Market Order options available to you.
Using a limit order allows you to set a specific rate of exchange that is above the current market levels. As soon as the exchange rate is available in the market, we will buy your currency automatically. This option is useful if you understand that you need to make a payment in a different currency in the future but you are not governed by challenging deadlines. If you find yourself in this position then a limit order will give you the best opportunity to achieve a better exchange rate.
Stop Loss Order
his works in a similar way to that of a limit order but the difference is that you choose a minimum exchange rate to trade at instead of a target rate. While it might seem unusual to work in this way, a stop-loss order will prevent you from losing out should the markets take a downturn. This is useful if your budget factors in the lowest exchange rate you need to achieve to not be negativity affected by market volatility.
Using Market Orders to manage exchange rate risk.
Market orders are a useful tool to manage exchange rate risk. It is common for limit orders and stop loss orders to combine to form part of a currency risk management strategy, alongside spot contracts and forward contracts.
As an example, Company ABC will be buying goods from their supplier in 12 months’ time in USD, and decide to use the following tailored approach:
- 40% of the USD value purchased as a forward contract at a rate of 1.30
- 40% of the USD value set as a limit order to buy USD at a rate of 1.33. This includes a stop loss order to buy USD at 1.25 to protect the downside should the USD strengthen against the GBP
- 20% of the USD value to buy at the spot rate in 12 months’ time when the payment is due to the supplier
While this is a basic example, it demonstrates that the company has secured 40% of the USD value they need to buy at a rate of 1.30. They have the potential to buy another 40% should the market move in their favour and reach 1.33, while protecting against a sharp downturn. Lastly, secure 20% of the value at the spot rate in 12 months’ time.
Once the market orders are set there is no obligation on the company to fulfil the orders as long as the target rate is still outstanding. This means they are able to alter the exchange rate targets as time goes by. In the above example, should the rate continue to increase to 1.35, the 40% market order would have executed, and another order for the remaining 20% value can be set to take advantage of rates continuing to strengthen.
NewbridgeFX can help you to set, and amend your risk management strategy to help you mitigate risk and maximise your returns.
Market orders are instructions to a specialist foreign exchange broker, such as NewbridgeFX, to buy or sell currencies at a specific exchange rate that is not yet available in the market. Market order types are either Limit Orders or Stop Loss Orders.
An instruction to buy or sell currencies at an exchange rate above the current market levels. Useful if you want to achieve a higher exchange rate in the future should the exchange rate strengthen.
An instruction to buy or sell currencies at an exchange rate below the current market levels. Useful if you want to protect yourself against a downturn in the currency markets, and to budget for the minimum exchange rate you would want to achieve.
AnswerBuy setting a Market Order it is possible to secure a target exchange rate in the future, which allows for better budgeting. By setting a Market Order, NewbridgeFX will watch the currency markets on your behalf and execute the transaction should the exchange rate be achievable. This enables you to focus on your business, without having to check the exchange rates on a daily basis.
AnswerMarket Orders are not guaranteed. While NewbridgeFX will watch the markets and execute should the target exchange rate be achievable, if the market does not reach the levels set then the market order will remain outstanding. Should this be the case, and the time had come to book a transaction anyway, then you would have to book at the Spot Rate on the day. Should this be the case, and the time had come to book a transaction anyway, then you would have to book at the Spot Rate on the day.
NewbridgeFX offers a specialist service in the deliverable foreign exchange market, promoting a range of products and services, available online or over the phone. Our products have been designed to meet the needs of our clients. A lot of these products are ways for businesses, and individuals, to manage and mitigate currency risk, and are used frequently during times of increased volatility. Alongside up to date foreign exchange related market news, which works in tandem with our range of products.
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