Market orders – your seasonal secret weapon

The currency markets are always volatile, but it’s safe to say that the last couple of years have been particularly dramatic thanks to a bevy of economic and political twists and turns. As a result more and more businesses are paying close attention to the movements of currency markets, monitoring changes to ensure that they capture the best rates when paying their international invoices. 

With several central bank interest rate decisions and ongoing Brexit talks scattered throughout December, the markets are likely to see a lot more movement as we close in on Christmas holidays and the start of 2018. But if you're wondering how on earth you will manage to keep an eye on exchange rates whilst enjoying a turkey dinner this December, there's actually a pretty simple solution to your problem that we'd like to share with you before you put on your out of office for the holiday. 
 

How can market orders help?

Market orders are an excellent way of controlling overseas payments or repatriating profits at a favourable, predictable rate without having to constantly keep one eye on the markets. Whether making a transfer in a couple of weeks’ time or several months down the line, market orders take time commitments out of the equation and help you keep a handle on your finances.

Quick to set up, market orders offer businesses a way of getting the rate they need and protecting themselves from negative market movements.
 

Get your house in order – what options are available?
 

There are three types of market order you can use to ensure you get a great rate no matter when you need to trade.

If the market is on good form but you don’t need to make a payment just yet, set a stop loss order to protect the current rate. It’ll target a rate a little below the current rate, so if conditions suddenly deteriorate your transfer will take place automatically at that level – protecting you in the event that the exchange rate keeps falling.

A limit order will help if you need to achieve a particular rate. This targets an exchange rate higher than the current rate. If the market reaches the rate you’re hoping for, your transfer will be conducted automatically even outside of regular trading hours so you needn't ring in to speak to your account manager.

You can even arrange for your limit order to automatically trigger a forward contract, which would fix that exchange rate for up to a year regardless of what the market goes on to do.

Finally, ‘one cancels the other’ is a tool that allows you to have both a stop loss order and a limit order in place without risking two transfers being conducted automatically if the market experiences a significant fluctuation. Whichever is activated by market movements first will automatically cancel the other.
 

So, when should you use market orders?

Market orders are useful if you don’t have an immediate need to send currency overseas. For instance, you may have accrued profits in euros that you don’t need to access right now, and want to maximise the amount of sterling you receive upon repatriation. By setting a limit order for a higher market rate, you know how much you’ll receive when the transfer is made.

Market orders are therefore useful if how much money you receive from the transfer is more important than when the transfer is made. Using Market orders when your business slows and employees take off for the holidays means you're guaranteed to transact at your target rate if the market reaches that point, no matter whether you're actually around to action the payment or not. 

Limit orders and stop loss orders can be adjusted at any time, so if the exchange rate you’re interested in looks like it’s on a sustained rally, you could raise either your limit or stop loss orders to protect the new, stronger rate.

Creating a hedging plan with Currencies Direct is easier than you’d think

Creating a hedging plan is the best way to stay on top of your overseas payments and ensure consistent cash flow. Currencies Direct are experts in helping businesses to minimise the risks that come from exposure to the foreign exchange markets and can develop a strategy that’s right for you in four simple steps.
 
1.             Identify
 
Reviewing your exposure to currency markets and the potential impact on cash flow
 
2.             Objectives
 
Determining your risk management aims and foreign exchange budget
 
3.             Strategy
 
Selecting the tools best suited to achieving your objectives and protecting profit
 
4.             Execute
 
Delivering your plan, with regular performance evaluation and development
 
With bank-beating exchange rates, a range of hedging options, in-depth support from our specialist team and up-to-the minute currency market forecasts, Currencies Direct can offer your business everything it needs to increase control and certainty over its profit margins.

Get in touch with our team today to find out just how much your business could benefit.