Continued Volatility On Currency Rates Shows The Worth Of Limit Orders

The performance of GBP EUR rates over the last week, and today in particular, has shown once again the value of a well placed limit or stop loss order.  Exchange rates for this currency pair have seen quite large swings in value continuously throughout the trading day as each fresh piece of news is released relating to the Eurozone crisis.  The result has been a very unpredictable market.  A limit order is where you place an order to buy at a particular rate (say 1.17 for example) even though the rates aren’t quite at that level.  Should the market move in your favour, and 1.17 become available then it will be immediately secured for you at that level even if you aren’t available to confirm, or if the rates then fell back to 1.16 soon afterwards. 

A stop loss is the reverse of this whereby if you wanted to gamble the rate will move in your favour (say 1.1750) but didn’t want to run the risk that it may drop below a particular budget rate (say for example 1.14) then you can place your stop at 1.14.  Should the rate drop to that price for any reason then the order would be secured, making sure that you don’t end up having to buy below your budgeted level.  Obviously there are benefits and drawbacks to trading with stop loss and limit orders but given how changeable the present market rate is many of our clients have been able to take advantage of them very successfully.

Tomorrow sees a lot of data released, most notably German and Eurozone GDP, and inflation data for the UK, all of which have the potential to move Euro exchange rates substantially depending on how the data comes out.  Once again stop loss and limit orders could be the key to success- to find out how e-mail Colm at cmg@currencies.co.uk of call 01494 725 353 and quote Euro Rate Forecast