What about forex trading

Forex Trading 

When companies doing business abroad buy or sell goods and services outside the home market, they are at risk due to fluctuations in currency values. Foreign exchange markets provide a way to reduce currency risk by setting the price at which a transaction will be completed.

To achieve this, a trader can buy or sell currencies in advance or in the exchange markets, which are locked in the exchange rate. For example, imagine that a company intends to sell US-made mixers in Europe when the exchange rate between the euro and the dollar (EUR / USD) is 1 euro to 1 dollar.

What About Forex Trading The blender costs 100 to manufacture, and the American company plans to sell it for 150 at a competitive price with other European-made blenders. If the plan works, the company will make a profit of $ 50 because the EUR / USD exchange rate is the same. Unfortunately, the US dollar starts to appreciate against the euro until the EUR / USD exchange rate reaches 0.80, which means that it now costs 80 to 0.80 to buy 1.00.

The problem with the company is that it still costs Forex Trading  $ 100 to make the mixer, but the company can only sell the product at a competitive price of 150 euros, when it translates to just $ 120 in dollars. (X 150 X 0.80 = $ 120). The dollar's rally resulted in lower-than-expected earnings.

The mixer can reduce the risk by shortening the price of the euro and buying the US dollar when it was at par. Thus, if the dollar appreciates, Forex Trading  profit from the trade will exceed the profit from selling the mixers. If the US dollar depreciates, then selling the mixers at a more favorable exchange rate will increase profits, and offset losses in trade.

This hedge can be made in the currency futures market. Forex Trading  advantage that a trader has is that futures contracts are standardized and authorized by the central authority. However, the future of the currency may be less liquid than the future of future markets, which are nested and found in interbank systems around the world.