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Why to use a Currency Broker and the benefits of bespoke contracts
Date Added: January 10, 2015 10:42:32 PM
Author: iqdir
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Why to use a Currency Broker and the benefits of bespoke contracts

Author: James Matthews

In the modern world technology allows information to be instantly shared and as a result people are becoming financially savvy. We are tiring of bad exchange rates being offered by the high street banks as the perception of the bank as the most effective method for money transfer is quickly and justly becoming eroded.

Currency Brokers operate as FX specialists and generally offer exchange rates that are a lot tighter than High Street Banks, this means more money in your pocket!


The benefits of using a Broker does not stop there, customer service from High Street Banks can be entirely impersonal and often you will not speak to a Foreign Exchange specialist. This means (among other things) that they will not talk you through any of the market movements and explain other bespoke contract options that could save you money. Among some of the options on your Currency Transfer are:

  • Spot Contracts
  • Forward Contracts
  • Limit and Stop Loss Orders

The majority of Currency Transfers, particularly through Banks are Spot Contracts. This is where a rate is agreed on the ‘spot\' to do a deal within a limited time frame and transfer the funds into another currency over an almost immediate time window. These type of contracts are particularly useful if the funds are needed urgently, however they are generally over used throughout the industry. A major criticism of clients when transferring funds is that there is a tendency to leave transferring funds right to the last minute, whilst the same people will negotiate to get that extra $1500 off a property they leave themselves at the mercy of exchange rates when sending money overseas. On a £200,000 Currency Purchase a 1movement in the GBP/USD rate (Cable rate) will cost you over an additional $3,000. By choosing the right time to make your Currency Exchange and by ensuring you get a good rate by using a Currency Specialist over a Bank you can save yourself thousands on your transfer.

Is a Forward Contract apt for me?


Communication is vital in giving yourself the best chance to achieving a good exchange rate. If you leave yourself a time frame where funds are available then a Forward Contract can be utilized to maximize your transfer.

Forward Contracts are a great tool to safeguard your Currency Transfer from risk. It is said that 97of people that gamble on the Currency Markets lose, a worrying statistic – especially as  many of these people are self considered experts. If you know that you need a certain amount of money to settle on a house by not agreeing a rate you are effectively risking that purchase as the rate moves (which it does around every 3 seconds!). Again for many of us this property purchase is a significant amount (if not all!) of our savings and so getting the best rate is of paramount importance. If the rate moves against you (the difference between the high and the low on EUR/USD last week was approximately 3 then a $400,000 property purchase could cost an additional €8,190.24 depending on when you make your transfer, and this is only over a week!


By utilizing a Forward Contract you remove the mercy of the markets, albeit you do run the risk of the market increasing but surely this is a better, safer option than the risk of the market moving against you and not having a rate tied in? At the very least by guaranteeing the rate you have extra information in that you can plan exactly for the amount of funds you have to play with and you can rest assured that the transfer is going to be affordable.

What is a Limit and Stop / Loss order and how do I use one?


Limit and Stop loss orders are another way of protecting your funds from market movements. Limit orders allow your transfer to process automatically if they hit a certain level. For instance if the mid market rate is 1.18 (the GBP/EUR rate at present) and you want at least €120,000 from your £100,000 transfer you can use a limit to automatically fill your requirement if the market moves in your favour (you need to note that the mid market rate will need to move above 1.20 to achieve 1.20). Limits are often used in conjunction with Stop loss orders.

On the same transfer if worst case scenario you need €110,000 on your transfer or your purchase becomes unaffordable then a stop loss order can be placed. As with a limit a stop, loss can be used to safeguard your rate from market movement, if the markets move very close to 1.10 then your rate will be filled so you can achieve no worse than €110,000 from your £100,000 money transfer.

By speaking to your Specialist Currency Broker all these options will be explained as well as any necessary data releases upcoming that may affect your transfer. On big data releases (interest rate decisions, GDP, Housing or Inflation figures) it is not uncommon to see the markets rise or fall up to 1in a matter of seconds.

If you have any Currency Requirement upcoming please feel free to get in touch and I would be more than happy to explain exactly how any of these options could benefit you.

Article Source: http://www.articlesbase.com/finance-articles/why-to-use-a-currency-broker-and-the-benefits-of-bespoke-contracts-3650143.html

About the Author

I am an Executive Dealer working for Award Winning Currency Brokerage Foreign Currency Direct. To transfer money via FCD contact: James Matthews Tel UK: 0800 328 5884 Tel abroad Tel: 44 1494 725 353 or create an account via the FCD website by clicking here, email me at jfm@currencies.co.uk, or follow me on twitter - @FindCurrency.