Use of correct strategy and proper money management techniques has delivered a great success to many businessmen who are involved in forex market. Businessmen who often buy or sell currency or assets take assistance of online forex company. With the help of such forex company, every businessman executes overseas transaction with currency hedging. The term “currency hedging” is quite familiar to those involved in forex market.
Currency hedging is a technique which reduces the risk involved any foreign exchange transaction. There are several options available in the market that provides currency hedging service up to various extent. First is forward contract, as per this service a person can lock the rate at which they will sell or buy currency on any date in the future. The agreement is done between the forex company and that person. The rate fixed by the dealer and an individual is widely known as forward exchange rate or forward rate. Forward exchange rates provide 100% currency hedging. As per forward contract service, a person can execute the order within the specified period which can be 1 month, 6 month or a year. The time span to execute payment is predefined between the dealer and an individual while making the agreement.
Another service which offers currency hedging is sport contract. However, sport contracts do not offer 100% currency hedging. A spot agreement means sale and purchase of foreign currency in a very small duration and with the current applicable rate. Forward exchange rates are spot rates of future. To trade with the spot rates, a person needs to analyze the currency fluctuation in market well in advance. Based on his research, a person can predict one rate and execute transaction in a very short duration. However, it may happen that sudden changes occur in the currency rates which can destroy the currency hedging service for your transaction and can put you in loss. It seems that because of the inadequate terms applicable in spot rates, traders are more attracted towards forward exchange rates.
There is one more reason why traders prefer forward exchange rates over spot rates is the time given for execution of payment. In property business, it is not possible to execute payment within 2 days of span. Forward contract service is widely used by the corporate people who are involved in forex market.
Currency hedging is a technique which reduces the risk involved any foreign exchange transaction. There are several options available in the market that provides currency hedging service up to various extent. First is forward contract, as per this service a person can lock the rate at which they will sell or buy currency on any date in the future. The agreement is done between the forex company and that person. The rate fixed by the dealer and an individual is widely known as forward exchange rate or forward rate. Forward exchange rates provide 100% currency hedging. As per forward contract service, a person can execute the order within the specified period which can be 1 month, 6 month or a year. The time span to execute payment is predefined between the dealer and an individual while making the agreement.
Another service which offers currency hedging is sport contract. However, sport contracts do not offer 100% currency hedging. A spot agreement means sale and purchase of foreign currency in a very small duration and with the current applicable rate. Forward exchange rates are spot rates of future. To trade with the spot rates, a person needs to analyze the currency fluctuation in market well in advance. Based on his research, a person can predict one rate and execute transaction in a very short duration. However, it may happen that sudden changes occur in the currency rates which can destroy the currency hedging service for your transaction and can put you in loss. It seems that because of the inadequate terms applicable in spot rates, traders are more attracted towards forward exchange rates.
There is one more reason why traders prefer forward exchange rates over spot rates is the time given for execution of payment. In property business, it is not possible to execute payment within 2 days of span. Forward contract service is widely used by the corporate people who are involved in forex market.
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