FX Trading: What is “Forward Booking”
Best Forex Trading Tips
Of our best fx trading secrets comes from a little known way for currency trading. This method is called forward booking. Forward booking helps minimize your exposure to volatile currency rates, and will give peace of mind to the trader. Our FX trading tip for today will help unravel the meaning of forward booking, as well as help teach our readers the benefits and risks of it.
In Fx Trading, forward booking is another tool to help hedge potential risk. A booking company, AKA a risk agent is involved in this transaction. They will setup a set exchange rate for the trader before the trader is ever made. The risk agent then accepts the potential losses/gains by their set exchange rate. This might sound a bit confusing, but I will simplify this for you. Let’s say that you are a Dollar Bull(remember this from a previous article?) and because of this, you feel like the dollar has great potential in the future. The dollar however is very weak right now, but in your heart you feel like the dollar is going to sky rocket. So, by using the forward booking method, you secure a currency exchange rate right now that you will be able to use in the future. Let’s say that it is November, and the dollar is very weak, so by going to a risk agent, you can secure a exchange rate for December. By doing this, you have the ability to trade this at a much lower exchange rate than other have the opportunity to do.
Although forward booking might seem very complicated, fx trading is not an easy trading method to learn. Do not get frustrated with this, as it can takes people years to become profitable in currency trading.
We have a lot of other fx trading methods that you can explore on our website. We encourage anyone who is interested in learning about fx trading to take a look at the articles below.
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, FX Trading: What is “Forward Booking"