Forex trading

   Foreign exchange is the exchange of one country's currency for another country's currency. Unlike other financial markets, the foreign exchange market has no specific location and no central exchange, but trades through electronic networks among banks, businesses and individuals. "Forex trading" is the simultaneous purchase of one currency in a pair of currencies and the sale of the other. Forex is traded in currency pairs such as EUR/USD (EUR/USD) or USD/JPY (USD/JPY).

means of transaction

  • Spot foreign exchange transaction: Also known as spot foreign exchange transaction, it is a foreign exchange transaction method in which both parties agree to handle the delivery within two business days after the transaction.

  • Forward transaction: also known as futures foreign exchange transaction, a foreign exchange transaction method in which the foreign exchange transaction is not delivered after the transaction is completed, and the delivery is carried out according to the agreed time in the contract.

  • Arbitrage: Arbitrage refers to the use of different foreign exchange markets, different currency types, different delivery times, and differences in some currency exchange rates and interest rates to buy from the low-priced side and sell from the high-priced side, earning foreign exchange from which profits are made. means of transaction.

  • Carry Trading: A trading method in which money is transferred from one market to another by taking advantage of the difference in interest rates in the currency markets of the two countries to make a profit.

  • Swap transaction: refers to a transaction that combines two or more foreign exchange transactions with the same currency but opposite transaction directions and different delivery dates.

  • Foreign exchange futures: The so-called foreign exchange futures refer to futures contracts with exchange rates as the subject matter to avoid exchange rate risks. It is the earliest variety in financial futures.

  • Foreign exchange option trading: foreign exchange options are traded in foreign exchange, that is, the option buyer obtains a right after paying the corresponding option premium to the option seller, that is, the option buyer has the right to pay a certain amount of option premium. The agreed exchange rate and amount agreed in advance are the same as the seller of the right to buy and sell the agreed currency, and the buyer of the right also has the right not to execute the above-mentioned sale and purchase contract.

  • In the future, there will be a foreign exchange trading platform jointly organized by banks and Internet investment companies, which will reduce unnecessary costs for personal investment.

Transaction classification

The foreign exchange market, also known as the "Foreign exchange" or "FX" market, is the largest financial market in the world, with an average turnover of more than $1.5 trillion a day—equivalent to 30 percent of all U.S. securities market transactions combined Yu times. Classification of foreign exchange transactions

From the nature of the transaction and the type of realization, foreign exchange trading can be divided into the following two categories:

  • 1. Basic foreign exchange transactions to meet the real trade and capital transaction needs of customers;

  • 2. On top of basic foreign exchange transactions, foreign exchange derivatives transactions are conducted to avoid and prevent exchange rate risks or for foreign exchange investment and speculative needs.

The basic foreign exchange transactions that belong to the first category are mainly spot foreign exchange transactions, while foreign exchange derivatives transactions include forward foreign exchange transactions, as well as foreign exchange selection transactions, swap transactions, and swap transactions.

There are 2 main reasons for foreign exchange trading. About 5% of the daily trading turnover is due to companies and government departments buying or selling their products and services abroad, or having to convert the profits they earn abroad into the domestic currency. The other 95% of trades are for profit or speculation.

For speculators, the best trading opportunities are always those of the most commonly traded (and therefore the most liquid) currencies, called "major currencies". Today, about 85% of daily trades are in these major currencies, It includes USD, JPY, EUR, GBP, CHF, CAD and AUD.

This is a real-time 24-hour trading market, foreign exchange trading starts in Sydney every day, and as the earth turns, the business day of each financial center in the world will start in turn, first in Tokyo, then London, and New York. Unlike other financial markets, foreign exchange investors can react at any time to foreign exchange fluctuations caused by economic, social and political events, whether day or night.

The foreign exchange market is an over-the-counter (OTC) or "intra-bank" market, because in fact foreign exchange transactions are made by both parties over the phone or through an electronic trading network. Unlike stock and futures trading markets, foreign exchange transactions are not centralized. carried out in a certain exchange.

Type of transaction

Foreign exchange transactions can be mainly divided into cash, spot foreign exchange transactions, contract spot foreign exchange transactions, foreign exchange futures transactions, foreign exchange options transactions, forward foreign exchange transactions, swap transactions, etc.

cash transaction

Specifically, cash transactions are transactions between tourists and those who need foreign currency cash for various other purposes, including cash, foreign exchange traveler's checks, etc.; Transaction, after the transaction is agreed, the receipt and delivery of funds should be completed within two business days at the latest; contract spot transaction is a way for investors to sign contracts with financial companies to buy and sell foreign exchange, which is suitable for public investment; futures transactions are based on The transaction is carried out at the agreed time and at the determined exchange rate, and the amount of each contract is fixed; option transaction is a transaction carried out in advance whether to buy or sell a certain currency in the future; forward transaction is based on the contract. The delivery date is processed, the contract can be large or small, and the delivery period is also more flexible.

From the perspective of the number of foreign exchange transactions, the proportion of foreign exchange transactions arising from international trade in the entire foreign exchange transaction is constantly decreasing. According to statistics, this proportion is only about 1%. Then, it can be said that the mainstream of foreign exchange trading is investment, with the purpose of making profits in the fluctuation of foreign exchange rate. Therefore, spot, contract spot and futures transactions account for a larger proportion of foreign exchange transactions.

Spot foreign exchange

Spot foreign exchange transactions are transactions between large banks and large banks on behalf of large customers. After the transaction is agreed, the receipt and delivery of funds will be completed within two business days at the latest.

The following mainly introduces the personal foreign exchange transactions launched by domestic banks for individuals and suitable for the participation of public investors.

Personal foreign exchange transaction, also known as foreign exchange treasure, refers to the transaction behavior of individuals entrusting banks to buy and sell one foreign currency into another foreign currency with reference to the real-time exchange rate of the international foreign exchange market. Because investors must hold a sufficient amount of foreign currency to be sold in order to conduct transactions, compared with the internationally popular foreign exchange margin trading, it lacks the short selling mechanism and financing leverage mechanism of margin trading, so it is also called real trading.

Since December 1993, the Shanghai Industrial and Commercial Bank of my country started the agency business of personal foreign exchange trading, with the substantial growth of personal foreign exchange deposits of Chinese residents, the introduction of new trading methods and changes in the investment environment, the personal foreign exchange trading business has developed rapidly, and has become my country's only foreign exchange trading business. The largest investment market outside the

The six banks including the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Construction Bank, the Jiaotong University, and the China Merchants Bank have all carried out personal foreign exchange trading business, and China Everbright Bank and Shanghai Pudong Development Bank are also actively preparing. It is expected that the competition among banks regarding personal foreign exchange trading business will be more intense, the service will be more perfect, and foreign exchange investors will enjoy better service.

Domestic investors, with the foreign exchange in their hands, go to any of the above-mentioned banks to open an account and deposit funds, and then they can trade foreign exchange through the Internet, telephone or over the counter. For more details, please refer to the real trading section of this website.

Contract spot

Contract spot foreign exchange trading, also known as foreign exchange margin trading, margin trading, virtual trading, refers to investors and financial companies (banks, dealers or brokers) specializing in foreign exchange trading, signing contracts for entrusting foreign exchange trading, paying With a certain ratio (generally no more than 10%) of the transaction margin, you can buy and sell foreign exchange of 100,000, hundreds of thousands or even millions of dollars according to a certain financing multiple. Therefore, buying and selling in this form of contract is only a written or oral commitment to a certain price of a certain foreign exchange, and then waits for the price to rise or fall, then settle the transaction, and obtain profits from the changed price difference, and of course bear risk of loss. Since this kind of investment requires more or less capital, it attracts many investors to participate.

Foreign exchange investment comes in the form of contracts, and the main advantage is to save the investment amount. When buying and selling foreign exchange in the form of a contract, the investment amount is generally not higher than 5% of the contract amount, and the profit or loss paid is calculated according to the amount of the entire contract. The amount of foreign exchange contracts is determined according to the type of foreign currency. Specifically, the amount of each contract is 12,500,000 yen, 62,500 pounds, 125,000 euros, 125,000 Swiss francs, and the value of each contract is about 100,000 US dollars. The amount per contract per currency cannot be changed at the request of the investor. Investors can buy and sell several or dozens of contracts according to their deposit or margin. Under normal circumstances, investors can buy and sell a contract with a margin of 1,000 US dollars. When the foreign currency rises or falls, the investor's profit and loss are calculated according to the contract amount, that is, 100,000 US dollars.

futures trading

Foreign exchange futures trading refers to buying and selling a certain amount of another currency with U.S. dollars at an agreed exchange rate on an agreed date. Foreign exchange futures trading and contract spot trading have similarities and differences. The trading of contract spot foreign exchange is carried out by banks or foreign exchange trading companies, and the trading of foreign exchange futures is carried out in a special futures market. The world's major futures markets are: Chicago Board of Trade, New York Mercantile Exchange, Sydney Futures Exchange, Singapore Futures Exchange, London Futures Exchange. The futures market must include at least two parts: one is the trading market, and the other is the clearing center. After the buyer or seller of futures trades on the exchange, the clearing center becomes the counterparty until the actual delivery of the futures contract. Futures foreign exchange and contract foreign exchange trading have both certain connections and certain differences. The following will introduce the specific operation of futures foreign exchange from the perspective of comparing the two.

The trading volume of foreign exchange futures is exactly the same as that of contract spot foreign exchange transactions. Foreign exchange futures trading is at least one contract, and the amount of each contract is different for different currencies. For example, a contract for pound sterling is also 62,500 pounds, yen is 12,500,00 yen, and euro is 125,000 euros.

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