For some people, foreign currencies are confusing. For others, they’re nothing but business. Whether your small business has one employee or a few dozen, currency trading can be part of your business strategy. Here are five reasons currency trading can benefit small businesses.
Exchange rates are variable
One of the first things to understand about currency trading is that exchange rates are variable. More than variable, they’re volatile, and any number of things can impact them. This might sound overwhelming, but it’s actually good news for small businesses, especially if they do business worldwide.
Since exchange rates fluctuate, businesses can count on them eventually coming back around again, no matter which way they are swinging. If you need to have payments processed or exchange funds, wait until the exchange rates are ideal for your needs. Doing this saves you money on exchange rates.
Many factors influence currency trading
Another reason currency trading is often beneficial for small businesses is predictability. We described above how volatile exchange rates can be, and that’s true—they often change wildly over a relatively short period of time. They are not completely unpredictable in every situation, however. Economic and political factors, in particular, are reliable triggers to change.
This can benefit small businesses in a few different ways. First, you can hedge your bets and buy low on the assumption that you’ll be able to sell high once the political or economic event hits. Election time, for example, is reliably volatile for currency, and it is sometimes possible to predict which way things will swing. Another way that these fluctuations can help you is very similar to the first section above. If you believe an event will push currency exchange in your favor, you can hold off on transactions until it comes to pass.
Lean into the volatility
We’ve described how currency trading is especially helpful if you’re doing business overseas, but there are a few elements of that benefit we haven’t yet covered. Most importantly, small businesses must understand the relationship between currency exchange and sales. Consider this a “mini” version of broader currency exchange trading.
Have you ever sat down to buy something from abroad and been pleasantly surprised at the exchange rates? If so, you can see how one currency falling a bit can boost sales. Everyone wants a good deal, and if they perceive your prices to be beneficial via exchange rate volatility, you might see increased sales. It’s important to note that those sales will be worth slightly less than when the dollar is strong, however.
If you typically sell five orders worth $10 each, you will make $50 total. If the dollar falls and that order is now worth $9, it might initially seem like bad news. But if you attract three more buyers thanks to the new exchange rate, you’re selling eight orders worth $9 each, which translates to $72 total.
Understanding the relationship between exchange rates and sales can help boost profit.
A second stream of income
You probably already realize this, but businesses of any size are expensive to run. When you’re trying to keep your bills paid while pouring all of the funds you can back into your business, it can be difficult to make ends meet. Forex trading can help boost your income and serve as security against unforeseen circumstances (such as the impact of an unexpected pandemic). If you have the spare cash to get started and aren’t concerned about potentially losing some funds along the way, currency trading allows many small business owners to build a second income stream to support their business.
Round-the-clock trading
While other markets open and close at set times each day, the currency exchange market is open 24 hours a day. That’s one of the reasons why it’s an ideal choice for businesses that need to trade currency. It is an incredibly accessible trading option that you can keep up with any time of the day or year and from anywhere in the world. You don’t have to let market opening and closing times dictate your day—you can log on whenever you need, take a look at some forex charts, and get your trading done quickly.
Conclusion
While it’s not for everyone, currency trading can have a big impact on small businesses around the world. All you need is to do a bit of research, and you will soon be able to use the forex market to boost your business.
