Are we all of us Forex Traders ?
This post will be about an interesting subject… as we are all of us making businesses…
Before we will begin to deep into the new subject we should know what is exactly the Forex abbreviation as well as why it exists.
Let suppose you have a small company – AlgoFlex Ltd. -, which develops a new electronic chip for the automobile industries and is located in stuttgart, Germany. After a long and a very good campaign you have received an order from a U.S.A. a famous automobile company – General-Motors Inc. – of 10,500 units to buy on the 01.01.2016 for amount of 500,000 $.
Now, you as the manager of the AlgoFlex have two options:
1. Ask from your bank to sell the 500,000 $, which you will get on 1.01.2016 for now EUR/USD rate which is 1.14400 EUR/USD. It means you will get 437,032€ on the 01.01.2016
2. To do nothing… it means on the 1.1.2016 you will get the 500,000$ and then will ask from your bank to exchange it to EUR at the now rate… which may be better than today. Let suppose, the EUR/USD rate will be 1.05600 on the 1.1.2016 , and so how much Euro you will have… 473,484€ !
very interesting… you have chosen to option 1 (do nothing) and got (473,484-437,032) more 36,452€ ! amazing not ?
In the reality, many companies, which should not be Forex traders are prefer to be , it is all about the human greediness… it means we are more likely to earn money by trading instead lose the potentially profits to the trading as well as to “know” how much the EUR/USD rate could give us. At Engineering Investments’s Portfolio we are just doing the same principle, but have more experience as much as advanced Mathematics Algorithms models for trading on the Forex market, which are enable us to be much more profitable over a long time, without being an Export company !