So, you’ve got your business off the ground and things are starting to grow beyond your local borders. Life is good and the money starts to roll in as you ship your wares to customers in countries around the world until you hit a snag. Whenever a business begins trading overseas and starts dealing with new currencies, exchange rates become an issue and something you need to think about if you want to make the most profit possible.
Although you don’t have to become a forex expert in order to trade overseas, it does pay to have some understanding of the industry when you’re growing your business. One of the best ways to keep tabs on the forex world and how certain currencies are performing is by following signals.
Ever since trading became an online activity open to the masses, the process of following established traders and experts started to become a lot easier. Thanks to websites such as FX Market Leaders, you can now get a quick and easy overview of the forex market to see exactly how various currency pairs are performing.
Using the Internet to Track Forex Movements
“Internet” (CC BY 2.0) by Ministerio TIC Colombia
Of course, if you’re an aspiring trader then following these forex signals is a great way to increase your bottom-line. However, if you’re a business owner looking to counteract the potentially negative impact of a currency’s downfall or to capitalise on a rally of strength, you can also use these signals to help bolster your bottom-line.
From a usability perspective, online hubs are a great way to follow forex signals as they break a trade down into its main components. For example, when you look at FX Market Leaders’ signal page, you’ll see the following information:
- Currency Pair: e.g. GBP/USD
- Suggested Action: Buy/Sell
- Trading Status: Active/Get Ready
- Suggested Stop Loss: (When to cut your losses)
- Suggested Take Profit: (When your profit is enough)
Understanding the Markets and Your Business
“Forex Currency Exchange on White Backgro” (CC BY 2.0) by Images_of_Money
If you really want to use these signals to your advantage then it’s important to understand how to analyse them. For example, let’s say you’re based in the UK and selling your own brand of laptops. In the UK you sell the laptops for £1,000, while they sell for €1,230 in Europe based on the latest currency conversion rate of £1 for €1.23.
Now, let’s assume that 12 months down the line the value of the pound falls to the point where a single unit is now worth €1.13. At this point, your £1,000 laptop would be selling for €1,130 which, as you can see, is €100 less per unit.
Because your production costs have stayed the same, the amount of profit you’re making in both the UK and Europe will stay the same, which means you have two choices as a manufacturer: reduce the price of the product in Europe and sell more units or keep the price the same and make more profit per unit.
The answer to this question is one that will depend on a variety of factors (e.g. if your product is unique you could afford to keep the price the same and enjoy a higher profit margin), but the fact remains that watching the fluctuation of currencies is crucial for your bottom-line. Indeed, such is the importance of these fluctuations that it can affect almost anything involving cross-border transactions, including football transfers.
Tracking the Changes with Ease
“US extange rate minus seven percent sign” (CC BY-SA 2.0) by gruntzooki
Of course, if this is the case then your mission then becomes: how do you keep track of these changes before they hit your bottom-line? Well, as we’ve said, watching forex signals is the way to do this.
For example, if you were reviewing the latest signals and saw that the experts were advising a “sell” action on the GBP/EUR currency pair, maybe because of the impending EU referendum, they are suggesting that the currency on the left of the pair (i.e. GBP) will decrease in value against the currency on the right (i.e. EUR).
To put it another way, the value of the pound is likely to drop, which means the price of your product in Europe will drop, which brings us back to the preview point: should you reduce the European price and sell more units or keep it the same and take a higher profit margin.
Become a Forex Fan
“IMG_2238” (CC BY 2.0) by jeaneeem
Of course, there are many other factors that go into the pricing of your product, but the movement of the currency market is one you must take note of if your start-up becomes an international enterprise.
While this doesn’t mean you should check the forex markets every hour to see the daily movements of each currency pair, you should take an active interest in the markets and use signals to guide your international business decisions.
Whether you use an online service like the one provided by a company such as FX Market Leaders or you frequent forex forums with weekly advice from active traders, you should be taking an interest in the forex world if you want to improve the efficiency of your business overseas.
