Any individual or business that has ever had to make a large foreign exchange or currency transfer may have utilized the services of a currency dealer. In this post, we are going to take a close look at what a current dealer is, why they can be useful, and what it is like as a career option.
What is a Currency Dealer in a Foreign Exchange Company?
As the name suggests, Currency dealers are simply people who buy and sell, and trade different foreign currencies. Some currency dealers work alone whereas other dealers work for foreign exchange companies that trade currencies on the international market.
The reason why currency dealers trade currencies are that the exchange rate between them changes and so carefully executed trades can generate fast and substantial profits. Let’s illustrate this with an example;
- On Monday, a currency dealer based in the US buys $10,000 worth of British pounds. At the time of the trade, the exchange rate is $1 = £0.88 and so the dealer gets £8,789.28.
- By Tuesday, the exchange rate has moved and the dealer is now able to sell the GBP back for $1.15 each, meaning they receive $10,107.67.
- This means they have made a $107 profit in 24 hours on one simple trade.
Foreign exchange companies trade huge amounts of foreign currencies each day. While there is always a risk involved, the potential for profit is enormous. So far, 2022 has seen some serious turmoil in the foreign exchange markets and the dollar is finally beginning to waver – this has both made and lost some fortunes.
Why Do People Use Brokerages?
The reason why individuals or businesses use currency traders (acting as brokerages) is that they can offer excellent exchange rates. Let’s say we need to send $10,000 overseas to a relative. If we use a bank to handle the transaction, they will offer a foreign exchange rate that is 3-4% below the market rate meaning our relative receives less while the bank nets itself a $300 – $400 easy profit.
Currency brokers, on the other hand, use their leverage to offer customers better rates. If we changed the $10,000 using a broker they could offer a rate of around 0.5% – 1% below the market rate.
However, it is important to keep in mind that currency brokers are only really helpful for large transfers. They are not interested in low-value exchanges so if we simply need to change $1,000 into Euros for our holiday, then we are better off just using a “high street” exchange bureau.
How Much Money Does a Currency Broker Make?
The average salary of a currency trader is very broad. In the US, for some top traders, annual salaries are over $150,000. At the other end of the spectrum though, the lowest salaries can hover around $11,500.
However, it is worth keeping in mind that many currency brokers work on a salary-plus commission structure. Typically, a trader can earn around 5% of the profits made on trade (in the example we gave, that’s a whopping $5.35!).
According to research conducted by the recruitment consulate Indeed, the average salary of a currency trader is $98k per year plus an additional $25,000 in commission.
Becoming a Currency Dealer?
Earning over $100k per year sounds like a dream for many of us. But what does it actually take to become a currency dealer and is it really worth it?
The requirements of becoming a currency dealer are not precisely fixed. For example, each foreign exchange company will apply its own recruitment criteria. Typically though, companies will expect applicants to have a bachelor’s degree in a relevant subject.
Some states require current dealers to obtain licenses and certifications. However, individual traders are not always required to hold these as long as the company they work for does.
Currency trader roles at large foreign exchange companies are competitive and each opening generally attracts far more applicants than hiring managers can handle. As such, any graduate looking to enter this field could enhance their CV by getting themselves licensed, trying to obtain an internship or at least getting some employment experience in a high street exchange bureau.
Currency dealing is a very exciting albeit perhaps stressful role. The potential for gains is massive and yet the potential losses can be ruinous – as such, currency trading is not something anybody should get into too lightly.
In terms of what currency dealers and brokers can offer to Joe Public, they do offer excellent, market-leading foreign exchange rates on large amounts but are far less suitable for smaller changes.