Where your currency exchange is concerned…

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Where your currency exchange is concerned – don’t watch it, limit it!

NEXT TIME you have to get up early for an appointment or to catch a morning flight, will you sit up all night watching the minutes tick away until 5.30am when you have to dress and leave, or will you set an alarm clock to wake you and sleep through the night, happy that the alarm clock is designed to do exactly that job for you?

The answer is obvious. What is the point of having a clock that you can programme to wake you up at precisely the right moment, if you refuse to use it and miss out on your beauty sleep instead?

Such inefficient time wasting goes on all the time in other areas of people’s lives and is most evident when they need to exchange their funds from one currency into another. So often, we come across new clients who understand the volatility of exchange rates and recognise the value of exchanging their funds at the right time to secure the right exchange rate, but have never been introduced to the market’s own alarm clock.

In the absence of this piece of market insight, these clients will spend an inordinate amount of time watching exchange rates, willing the rates to throw up a signal that says the exchange rate is as good as it is going to get. In 13 years of trading foreign exchange, I have yet to see such a signal and, if I trade for another 50 years, I have no expectation that I will.

Instead, what happens is that the exchange rate rises and looks ready to rise further, so the watcher waits; it unexpectedly falls and looks like it will stop and so the watcher waits; it falls further and the person is panicked into trading in case the exchange rate collapses and costs them more money.

What makes life so much less stressful and frees up so much leisure time is a combination of technical analysis and market orders. Technical analysis is the method I and most currency trading rooms use to target the expected highs and lows in exchange rates. Charts of exchange rates throw up all manner of patterns and trends to follow, as well as mathematical calculations that determine where the traders on bank dealing desks will be happy to buy and sell their currencies.

Their actions cause the market to rally, stop, turn and fall. So, knowing where these levels are allows us to take advantage of the market ranges that develop through traders’ actions. It would be odd if a private client had the interest or the inclination to undertake years of technical analysis training just to be able to chart the market, but, as a currency specialist in the private client market, that is exactly what my company provides for our clients.

So, armed with an educated estimate of where the top and bottom of the exchange rate range is, the currency alarm clock can be set. The tool for the job is called a ‘limit order’ and it is a very simple market device that has been used by speculative traders for many years. In fact, anyone who has traded stocks and shares may have come across such a tool. A limit order is placed to buy a certain amount of currency against another at a predetermined level, and is most effective when that level coincides with the top of a technical range.

Like the alarm clock, it remains silent, ticking away inconspicuously, until it reaches the desired level and then triggers to activate the transaction. This not only gives the buyer time off from screen watching duties to have a life, but it also means that whenever the right exchange rate is reached, the limit order won’t be out shopping or relaxing by the pool. It will be there, ever vigilant, ready to take advantage of the rate and save you money.

As my father always said, the right tool for the job will save you time and effort every time. He also said, “that’s done then, let’s get to the pub” quite regularly, so I guess he was probably right.

• David Johnson is a currency dealer with Halo Financial Ltd, delivering competitive exchange rates and a personalised service to help private clients throughout Europe save time, money and hassle on their foreign exchange. He can be contacted via e-mail at [email protected]