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.

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    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?
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    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

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Our table below lets you compare the services you can use to send money abroad. Choose if you want to send under or over £10,000, and you’ll be shown a list of services that can help you.
Name Product Filter Values Fastest Transfer Speed Fees (Pay by Bank Transfer) Learn More
Wise (TransferWise) for large transfers
Within an hour
From £3.75

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Wise uses the mid-market rate and transparent fees to help you send money in 45+ currencies.
TorFX
24 hours
£0

View details
TorFX sends money overseas in 30+ currencies, with competitive rates for transfer amounts over $2,000.
Central FX
24 hours
£0

View details
CentralFX's dedicated team will guide you or your business from first call to final payment.
Currencies Direct
Within an hour
£0

View details
CurrenciesDirect makes transferring money abroad simple with bank-beating exchange rates.
CurrencyTransfer
24 hours
£0

View details
CurrencyTransfer lets you shop around for the best exchange rate on its online marketplace.
XE Money Transfers
24 hours
£2
SPECIAL OFFER ✓ £25 Amazon voucher when you refer a friend

View details
XE has fast transfers with low fees and a range of foreign currency tools.
Wise (TransferWise)
Within an hour
From £3.75

View details
Wise uses the mid-market rate and transparent fees to help you send money in 45+ currencies.
Azimo
Within minutes
From £0.99
SPECIAL OFFER ✓ First two transfers free for new customers.

View details
Azimo sends money directly to a bank account or over 280,000 cash pick-up points. It also has fast transfers to 50+ countries.
CurrencyFair
24 hours
€3
SPECIAL OFFER ✓ Zero fees on your first 10 transfers

View details
CurrencyFair has bank-beating exchange rates and fast transfer times on 15+ popular currencies.
Remitly
Within minutes
From £1.49
SPECIAL OFFER ✓ Free transfers and better exchange rates for new customers

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Remitly has quick, affordable transfers around the world, with both express and economy options.
WorldRemit
Within an hour
From £1.99
SPECIAL OFFER ✓ Use promo code 3FREE to send your first 3 transfers with no fee. Conditions apply.

View details
WorldRemit sends money to 110+ countries for bank-to-bank deposits, cash pick-ups or mobile top-ups.
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