If you’ve been researching ways to save money on your international payments and currency transfers, you might have come across the term market order as a way to manage the risk of fluctuations in the currency market.
What is a market order?
A market order allows you to specify a target rate at which you’d like to exchange funds. There are two types of market order – a limit order and a stop-loss order – which allow you to set a rate above the current exchange rate and the lowest acceptable rate that you’re prepared to exchange. There are no guarantees with a market order; the market may never hit the rate that you want, but you can get guidance to help you set realistic levels and protect against losses. Once you’ve set up a market order, your funds are exchange as soon as one of the specified rates are reached.
I have an urgent payment for a house deposit, can I set up a market order?
If you have a deadline for a payment, then a market order may not be the best approach. This is because the market order can only work if the foreign exchange market hits the specified rate and there is no way to predict when that might happen. You may be lucky, but as with anything in the currency market, there are no guarantees. Political uncertainty, economic changes on the domestic and global level all influence currency values, which fluctuate in relation to each other. This means that if you have an urgent deadline, you might be better to look at alternative currency tools to gain great rates to make the payment.
When could a market order help me save money?
If you have a longer time frame, then a market order may be more beneficial as you have the opportunity to exchange currency at a time that helps you make the most of your money. There are still no guarantees, but the longer time-frame does improve your chances. For example, if you’re paying for a wedding overseas and the bills are due in six months, you could set up a market order, or a series of them, and transfer funds at your desired rates so that you’re ready to make the payment when it comes due.
Is a market order right for me?
Every situation is different. It’s worth talking to a currency specialist who can help you decide where to strategically place market orders and explain the associated risks. It’s worth considering the alternatives; market orders trigger automatically so if the rate improves further you will not be able to receive the higher rate. However, a market orders margins can work well if you have upcoming payments but aren’t restricted by tight deadlines. The advantage of using market orders is that they can be placed on a GTC (good until cancelled) basis, allowing you to place an order and not have to watch or monitor the markets and react once the rates are in your favour. However, it isn’t the only way to make the most of your money overseas – that’s why moneycorp works closely with our clients to provide guidance and support for international payments and suggest the solutions that might work best for you.