What is foreign exchange trading, what is foreign exchange margin

What is foreign exchange trading?

Foreign exchange trading is the exchange of one country's currency with another country's currency. Foreign exchange is the world's largest trade, with a daily turnover of more than 1.5 trillion US dollars. Unlike other financial markets, the foreign exchange market has no specific location and no central exchange. Instead, transactions are conducted through electronic networks among banks, companies, and individuals. Due to the lack of a specific exchange, the foreign exchange market operates 24 hours a day. The bargaining and counter-offering during the transaction process are transmitted through major information companies, and investors are informed of the market conditions of foreign exchange transactions in real time.

What is foreign exchange margin?

Among various investment projects, it is the fairest and most attractive It can be regarded as foreign exchange margin trading. Foreign exchange margin trading is when investors use the trust provided by a bank or broker to conduct foreign exchange transactions. Banks or brokers can generally provide more than 90% of the trust. In other words, investors only need to hold about 10% of the funds (margin) to conduct foreign exchange transactions. For example, the minimum margin requirement of fxsol is 1%. Investors can conduct foreign exchange transactions with a maximum of 10,000 US dollars with a minimum margin of 100 US dollars. It can be said that a small amount of money goes a long way!

How to make a profit?

The value of currency keeps fluctuating in response to the atmosphere of foreign exchange trading. For example, the daily fluctuation of the Japanese yen is about 0.7% to 1.5%. Investment Investors can not only make profits by buying at low prices and selling at high prices; they can also make profits by selling at high prices first (airdrop/short selling) and buying at low prices; because foreign exchange margin trading has the characteristics of pre-purchase and pre-sale, Reciprocal investment is allowed. Moreover, there is no designated settlement date for foreign exchange margin trading. The transaction can be completed in an instant. You can enter and exit the market 24 hours a day, and you can also change the investment direction strategy at any time. It is the most flexible and reliable investment.

The specific situation of foreign exchange margin

The exchange rate is displayed in the international market, and the exchange rate is expressed in five digits. Displayed, such as:

Euro EUR0.9003

Japan-yen JPY111.80

Australian dollar AUD0.5280

Exchange rateThe minimum change is the last number (one point), that is:

Euro 0.0001

Japanese yen JPY0.01

Australian dollar AUD0.0001

The exchange rate of currency is not necessarily equal to the currency High or low value. Classified by exchange rate, currencies are divided into:

Direct currency - Euro EUR, British pound GPD, Australian dollar AUD, New Zealand dollar NZD...

Indirect currency─Japanese yen JPY111.80, Swiss franc CHF, Canadian dollar CAD...

What is the direct currency exchange rate of 1 direct currency? US dollar; for example, Australian dollar AUD0.5280, that is, one Australian dollar is worth 0.5280 US dollars. The euro EUR0.9003, that is, one euro is worth 0.9003 US dollars.

Indirect currency refers to how much indirect currency is exchanged for 1 U.S. dollar; for example, Japanese yen JPY111.80, that is, 1 U.S. dollar is exchanged for 111.80 yen. Swiss franc CHF1.6006, that is, 1 US dollar is equal to 1.6006 Swiss francs.

Quotation

Foreign exchange margin is traded at the purchase price (DealingRate), which is determined by the bank or broker Set the buying and selling prices by yourself at the same time, and the customer decides the buying and selling direction by himself. Taking fxsol EURUSD as an example, the difference between the buying and selling prices (spread) is 3 points. For investors, the smaller the price difference, the smaller the cost and the greater the chance of profit.

Contract unit

The contract unit of foreign exchange margin trading is similar to that of stock trading. Quantity is traded as a unit (lot/mouth). In fxsol, one lot is generally worth 100,000 yuan to conduct transactions and calculate profits and losses.

Calculating profit and loss

Calculating profit and loss is to calculate the value of the spread between buying and selling, such as Buying the euro is 0.8946 and selling it is 0.8956, and the spread is 10 points. To calculate the value of each point, you can first separate direct currency and indirect currency. directThe characteristic of currency is that no matter how high or low the exchange rate fluctuates, it will not affect the value of each point. For example, if one lot of EUR is worth 100,000 yuan, each point is worth 10 US dollars no matter how the exchange rate fluctuates. The procedure is as follows:

〈Minimal change unit/exchange rate〉*Contract unit*Lot size=Value of each point〈0.0001/0.8942〉*100, 000*1=11.183 EUR

We put 11.183EUR* exchange rate to know that the value of each point is equal to 10 US dollars. What if the euro exchange rate rises to 0.9000, what about the value of each point?

We know that the exchange rate of 11.183EUR* is also equal to 10 US dollars. In short, it is only 100,000 yuan per lot, and the value of each point of all direct currencies is 10 US dollars.

The value of each point of indirect currency will change due to exchange rate fluctuations. The calculation procedure is similar to direct currency, except that the contract unit is based on US dollars. Taking the Japanese yen JPY130.46 as an example, the calculation procedure is as follows:

〈Minimum change unit/exchange rate〉*Contract unit*Number of lots = USD value of each point