If you are a foreign exchange broker or if you are planning to
become one, then you must have all the necessary knowledge about the
business. Today online foreign exchange trading is becoming popular
worldwide. The main reasons that attribute to this popularity include
the transparency in which the trading is done, the cheap start-up costs
(some companies accept as little as $50 to begin), no hidden charges and
the ability to access and trade at any time of the day.
For a
trader to be successful in the business, he or she will need a website. A
successful Forex website will, of course, need to have plenty of Forex
information. Forex is a company that can provide you with this valuable
information for free. One of the must-have resources for your site is
the swap history.
What is a Forex swap?
A
broad, general definition for a Forex swap is this: the simultaneous
purchase and sale of identical amounts of one currency for another with
two different value dates. The idea of currency swaps was initiated in
the 1970s to control other currencies in the United Kingdom. The main
reason was to eliminate premium fees that were charged to UK companies
when borrowing in US Dollars.
How the Forex swap works
A
Forex swap has two parts. First, it has a place for foreign exchange
transaction, whereby two parties agree on a particular rate and an
initial date for buying and selling a specific amount of one currency
versus another. The initial date is sometimes called the near date since
it is the first trading day in respect to the current day.
The
second part is the future foreign exchange transaction. In this part,
the same amount of currency is simultaneously bought or sold against
another but this time, a second date and exchange rate is agreed upon.
In this case, the date agreed upon is referred to as the far date.
What are the benefits of currency swaps?
The
main advantage of currency swapping is protection against risks.
Currency values constantly fluctuate worldwide, so if you are an
investor or importer, currency swaps can help you minimize your risk of
losing money in transactions. Here is an example where you are importing
goods worth $100,000 from Europe. Assuming the exchange rate for dollar
to euro is 1:0.6, you will spend € 60,000 on your purchases at the
moment. However, the rate may not be the same in a year's time. The rate
may rise, which would increase your cost. In this scenario, you can use
currency swapping to avoid the risk. The only disadvantage is that if
the rate falls within that time, you lose money anyway.
One of the
challenges owners and operators always face is finding the right tools
for their finance websites. There are many websites which offer these
tools online. Forex is one of these companies. The special thing about
Forex is that they offer the same accurate and reliable information as
other companies, yet all their tools are offered at no cost. All the
tools are free of charge, making them a perfect choice for a beginner.
Your website can benefit from Forex free tools. Go to http://forex.fo/ now and take a look at the variety of tools it offers completely free of cost.
