How to lock in an exchange rate for your money transfer with hedging options

Save on your international money transfer or forex trade with a temporary, guaranteed rate.

Updated

Fact checked
Promoted

WorldRemit

WorldRemit logo
  • Use promo code 3FREE to get three free transfers
  • Easy to use with round-the-clock help
  • Get cash to family and friends in minutes
Go to site
    Hedging options and forward contracts, especially for recurring transfers, can help you lock in a great exchange rate.

    What does it mean to “hedge” your options?

    The investment community uses “hedging” to describe protecting or lowering your risk of loss on a trade. There are a few tools you can use to hedge your risk in the foreign exchange and currency transfer market: forward contracts, limit orders and stop-loss orders.

    Contract options

    Forex transactions can be completed in two ways: by using a spot contract or using a forward contract.

    Spot contracts

    A spot contract is just that — a rate that a bank or money transfer service quotes on the spot at the moment of your exchange. If you’re sending a one-off transfer, you’re using a spot contract. The rate you’re offered is often a margin above the interbank or mid-market rate, marked up a bit so the provider can pocket the difference. You’ll typically get a better spot contract with an independent money transfer service than you will with a bank.

    Forward contracts

    Unlike a spot contract, a forward contract allows you to lock in a favourable exchange rate for future purchases, protecting you against unexpected fluctuations in exchange rates. Ideal for businesses or those making recurring transfers, these agreements usually guarantee you a rate from 30 days to up to two years. They typically require a deposit with the balance due once the contract is executed.

    What is the mid-market rate?
    table
    The mid-market rate is what your money’s actually worth on the global market compared to another currency. It’s the midpoint between worldwide supply and demand for that currency — and the rate banks and transfer services use when they trade among themselves. Use this rate as a baseline to compare against the rates provided by your bank or transfer service. With it, you’ll discover which companies offer the best rates.

    Order options

    Exchange rates constantly fluctuate, and most foreign exchange providers offer order services that smooth out the predictability of these fluctuations. Order options are best for those who have a good handle on predictions and know when it’s a good time to buy.

    Limit orders

    With a limit order, you specify your ideal exchange rate. When the market reaches that rate, it’s locked in and you’re contacted to authorise the completion of your transfer.

    Stop-loss orders

    A stop-loss order is nearly the opposite of a limit order: instead of specifying an ideal rate, you indicate a rate you want to avoid dropping below. If the market falls to that rate, your currency is purchased automatically, giving you the potential to profit when the market rises again. Many people use limit orders and stop-loss orders together.

    Recurring payments

    If you need to send regular transfers overseas — weekly, monthly or quarterly payments to the same recipient — many services will allow you to lock in even better rates with lower fees.

    As with any money transfer transaction, be sure to compare your options so you can get the best rates and fees for your money.

    How can I hedge with an online forex broker?

    To begin hedging your forex trades, you’ll need to:

  1. Determine your options. Learn whether your broker offers such hedging tools as forward contracts, limit orders and stop-loss orders or find one that does.
  2. Assess your risk tolerance. No trade carries zero risk, so you’ll need to determine how much risk you’re willing to take.
  3. Choose two currencies to trade. Consider pairing the “majors” — for example, dollars and pounds — against the euro.
  4. Contact a forex broker. If you’re a new client or will make ongoing exchanges, ask if you’re eligible for any bonuses or perks. Then get to hedging your trades.

Compare international money transfers

Table: sorted by a combination of service offering and the amount your recipient will receive
Use our comparison calculator to assess transfer fees, exchange rates and other details for sending funds overseas with our money transfer affiliates.

Min. Transfer Amount Transfer Speed Online Transfer Fee Rate Amount Received Description CTA Details
GBP 1 2 days GBP 20.00 1.125 EUR
5,601
TransferWise uses the mid-market rate and transparent fees to help you send money in 45+ currencies. Go to site Show details
GBP 2,000 1 day GBP 0.00 1.113 EUR
5,567
TorFX sends money overseas in 30+ currencies, with competitive rates for transfer amounts over $2,000. Go to site Show details
GBP 1,000 Same day GBP 0.00 1.113 EUR
5,567
SpartanFX has fee-free transfers, a best exchange rate guarantee and personalised one-to-one support for every customer. Go to site Show details
GBP 2,000 1 day GBP 0.00 1.113 EUR
5,567
CurrenciesDirect makes transferring money abroad simple with bank-beating exchange rates. Go to site Show details
GBP 5,000 1 day GBP 0.00 1.118 EUR
5,592
CurrencyTransfer lets you shop around for the best exchange rate on its online marketplace. Go to site Show details
GBP 2,500 Same day GBP 0.00 1.113 EUR
5,567
CentralFX's dedicated team will guide you or your business from first call to final payment. Go to site Show details
GBP 1 Same day GBP 0.00 1.119 EUR
5,594
XE has fast transfers with no fees and a range of foreign currency tools. Go to site Show details
GBP 10 Within an hour GBP 1.99 1.11 EUR
5,548
Special offers like free transfers and better exchange rates available for new customers.
Remitly has quick, affordable transfers around the world, with both express and economy options.
Go to site Show details
GBP 5 2 days EUR 3.00 1.119 EUR
5,595
Special offer: Zero fees on your first 10 transfers.
CurrencyFair has bank-beating exchange rates and fast transfer times on 15+ popular currencies.
Go to site Show details
GBP 10 Within an hour GBP 2.00 1.119 EUR
5,591
First two transfers free for new customers.
Azimo sends money directly to a bank account or over 280,000 cash pick-up points. It also has fast transfers to 50+ countries.
Go to site Show details
GBP 50 Same day GBP 2.99 1.113 EUR
5,564
Use promo code 3FREE to send your first 3 transfers with no fee. Conditions apply.
WorldRemit sends money to 110+ countries for bank-to-bank deposits, cash pick-ups or mobile top-ups.
Go to site Show details

Compare up to 4 providers

Disclaimer: Exchange rates change often. Confirm the total cost with the provider before transferring money.

More guides on Finder

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site