Exchange rates and how they affect us
Foreign exchange rates affect individuals, families and business all around the world. The currency market is the biggest industry in the world with the most transactions daily. Whether you are going on holiday, buying property abroad, exporting and importing for your business or dealing with international services industry companies you will require currency transactions. If you are a currency speculator or work for an investment bank you may be forex trading to make money on the everyday changes in the exchange rates.
Timing of currency transactions
If you knew when exchange rates were going to fluctuate you would be guaranteed to make money by buying on the lows and selling on the highs of the currency graph. However because no one knows for certain the outcome daily or even minute by minute it is instead a matter of researching the market to gain knowledge of the reasons for currency movements. From predicting for example the outcome of political events you can make currency purchases and sales to reflect your market position. If you are correct about how markets will be affected by country events for example you can make money using an Forex Broker.
Other factors that may help to predict future exchange rates are historical rates; Currency exchange rate graphs showing the past rates can provide an indicator of the future direction of the exchange rate. You may be able to spot continuing trends or know something about market conditions that means the current direction of the exchange rate is unlikely to continue. Based on your knowledge and predictions you can make informed decisions to trade foreign currency.
Also available are forward contracts which allow you to fix the exchange rate for a transaction at a date in the future. For example, if you are working for a business importing from overseas you can fix the exchange rate and therefore know with certainty your future cashflow(s) eliminating the risk of having to spend more money on your business supplies. Likewise you may be buying a property abroad and want to know with certainty how much you will be paying when you sign the contract to buy and exchange money at a date in the future.
Something to consider is trading forex with leverage which means for every unit of currency you trade you will be exposed at leverage as though you were buying a larger amount of currency. Obviously, although you can gain more money faster using leverage you can also lose more and lose it faster than if you were only exposed by the amount of currency you actually used to open your market trading position.
Tools to help you get the best exchange rates
Exchange rate alerts are available from www.exchange-rates.com which will automatically inform you when your desired, target exchange rate has been reached on the currency markets. Currency news and email updates to your inbox are available. Furthermore you can get access to iPhone exchange rates apps and Android exchange rates apps at www.exchange-rates.com so you can check the current exchange rates and make currency conversions on your smartphone.
Forex brokers and currency specialists
When buying and/or selling foreign currency you should consider using the services of a forex broker or currency specialist.
If you are a forex trader you can use leverage as explained above when using the services of a forex broker.
If you are an individual or business you can use a currency specialist to gain market insight. For example, compared with using a high street bank, if you are buying a property abroad worth thousands of pounds, dollars or euros you can save money. Not only would you save money because they provide better exchange rates but they also provide knowledge of market movements and the likely direction of the exchange rate so a currency specialist will help you to choose the most appropriate time to buy or sell currency.
Amount of currency exchanged
The more currency you are dealing with the greater your exposure to currency exchange rates. With market research (either carried out by yourself or a currency specialist) you can begin to identify the best time to make your currency transaction(s) which will maximise your chances of saving money or increasing the profit from your purchases and investments involving foreign currency.
For live exchange rates and currency tools please visit www.exchange-rates.com.