Getting the Best Foreign Exchange Rate

If you are just going on holiday for the weekend in New Zealand, you are probably not too concerned about getting the absolute best foreign exchange rate. However, if you have the need to conduct a high-volume currency exchange, you will want to get the best rate because even a small difference could translate into saving or paying hundreds of extra dollars.

Fortunately, you can take advantage of a few techniques that are employed by foreign exchange experts. These techniques will work both for one-time payments in foreign currency or for regular transfers. The first step in getting the best foreign exchange rate is to locate a respective and reliable broker that specialises in foreign currency exchange. Such a broker will be able to walk you through the process of getting lower rates than you would get from a bank.

Timescale

When trying to get the best foreign exchange rate, you will benefit by giving your broker as much advance notice as possible. Once your broker knows of your need, he or she can watch the trends in the market, and may save you money by conducting the transaction much earlier than when you actually need it. Predictions can also be made according to the global financial data that reaches the market.

Depending on how much time you have before you need to conduct the exchange, a different timescale model will be implemented to help determine when you will get the best possible rate. To an inexperienced trader, the amount of information that can be obtained from the Internet can be overwhelming. So much information without a basis of understanding causes confusion, and that is why inexperienced traders do not usually get the best rates.

Trends

To get the best foreign exchange rate, it is necessary to identify all of the trends of your currency pair. Information will be available for three main trends: the daily trend, the monthly trend and the yearly trend. The time you have before you need to make the exchange will determine which of these trends you should be watching.

If you have less than two weeks, you will benefit the most by paying attention to the daily trend. If the rate has been moving in your favour over the last few days, it is prudent to wait until you see the first signs of opposite movement before making the exchange. If you do not want to do the research yourself, it is much easier to call your broker and place what is called a limit order. A limit order specifies a rate at which, when reached, the exchange is made automatically.

If you have several months before you need to make your exchange, you will want to look at the mid-term and long-term trends. If the trends are out of your favour, it may be best to buy sooner rather than later because the rate will undoubtedly get worse and a rebound may not come so quickly. You can also place a limit order for this timeframe. If you don’t have the money to make the exchange now, you can book a forward contract, which allows you to lock in a rate with only a margin deposit.

Points of Support and Resistance

While market trends can help you get the best foreign exchange rate, it is not the only technique available. Another technique that is related to trend analysis is to use points of resistance and support. Currencies have a high and low point at which they begin to move in value back towards the trend average.

A point of resistance is determined by years of trend analysis of a specific currency pair. A reverse trend at this rate has occurred so many times in the past that the point of resistance is perpetuated by the influx of trades made by brokers and foreign exchange experts. Because of the influx of orders, the rate shift can be dramatic at the point of resistance.

No matter which of these techniques or combination of techniques you wish to employ, the trade will be most efficiently conducted through a broker. An experienced broker will already know the trends and the points of resistance and support so you can be assured of getting the best rate.