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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 is implemented when the exchange rate becomes available and to ensure you react at the right time, you’ll need expert guidance as it will require markets to be monitored in real-time.

Essentially, a market order will instruct your trader that you want to achieve a certain exchange rate in the future and so, they work for you, monitoring and tracking waiting for the moment to arrive, ensuring you take action at the correct time. This will ensure that the exchange rate is secured for the agreed amount. However, it is important to understand that the exchange rate is not guaranteed to be achieved but if it is, your foreign exchange provider will execute at the right time.

There are also a few variations of market orders possible, such as the ability to settle the transaction as a Spot deal, or request the order become a Forward Contract once the rate is secured.

Why Should You Use Market Orders?

If there is no immediate need to make international payments but they will need to take place in the future, then market orders are a great option when it comes to currency risk management. Using specialist assistance, they’ll gain an understanding of your needs and talk through your options, helping you to determine which market order is right for you. Your options are:

  • Limit Order
  • Stop Loss Order

Limit Order – What Is It?

Using a limit order allows you to set a specific rate of exchange that is above the current market levels. As soon as the rate is reached, you will purchase 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 – What Is It?

This 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 a certain exchange rate as the stop loss order would come into play at that rate, ensuring your finances stay on track.

It is also common for limit orders and stop loss orders to be used together to form part of a currency risk management strategy. However, to ensure that you make the right decisions, it is always worth using foreign exchange specialists.

 NewbridgeFX can help you to manage your Market Orders while also offering a fee free, fast, efficient and secure service. For further information on how NewbridgeFX can help please contact us

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