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Foreign exchange margin trading

{}Posted in2023/2/25 0:29:21 | 5Browse

cashbackforexexness forexcashrebate forexrebates Forex rebate for Exness (Foreignexchangemargintrading) What ForexrebateforExness foreign exchange margin trading Foreign exchange margin trading refers to investors with their own funds as a guarantee, the bank or broker to provide financing amplification to foreign exchange trading foreign exchange margin trading principle Foreign exchange margin trading initially arose in the 1980s London Foreign exchange margin trading is the investor with the bank or broker to provide the trust for foreign exchange trading it makes full use of the principle of leverage investment, between financial institutions cashback forex financial institutions and investors to establish a forward foreign exchange trading method in the transaction, the investor only need to pay a certain amount of margin can be 100% of the amount of the transaction, so that investors with a small amount of money can also go to the financial market Foreign exchange transactions in accordance with the level of the United Kingdom and the United States and other countries, the general financing ratio is maintained at 50 to 100 times more In other words, if the financing ratio of 100 times, then investors only need to pay about 1% of the margin will be able to foreign exchange transactions, that is, investors only need to pay $ 1,000 to be able to carry out 100,000 U.S. dollars in foreign exchange transactions For example, investor A to carry out foreign exchange margin Trading, the margin ratio of 1%, if the investor expects the yen will rise, then the actual investment of 100,000 U.S. dollars (1000X1%) of the margin, you can buy the contract value of 10 million U.S. dollars of yen if the yen against the dollar exchange rate rose 1%, then the investor will be able to profit 100,000 U.S. dollars, the actual rate of return can reach 100%; but if the yen fell 1%, then The investor will lose everything, the principal invested will be lost generally when the investors losses exceed a certain amount, the dealer has the right to stop losses and forced to close positions foreign exchange margin trading characteristics of this foreign exchange trading method in the 1980s in London, and then flowed into Hong Kong, China in addition to the same as futures trading also implement the margin system, foreign exchange margin trading (margin foreign exchange trading) and Different from other trading characteristics (1) foreign exchange margin trading market is invisible, not fixed, in between the customer and the bank directly, there is no exchange intermediaries; (2) foreign exchange margin trading no expiration date, traders can hold positions indefinitely; (3) foreign exchange margin trading market size is huge, many participants; (4) foreign exchange margin trading currency rich, all convertible currencies can be used as trading. All convertible currencies can be used as trading varieties; (5) foreign exchange margin trading time is 24 hours without question; (6) foreign exchange margin trading to calculate the interest rate difference between various currencies, financial institutions must pay or deduct from the customer deposit advantages of foreign exchange margin trading foreign exchange margin can attract so many individuals and institutions to participate, based on its advantages: (a) 24 hours a day From Monday to Friday, 24 hours a day continuous trading, easy to enter and exit at any time, to avoid the risk brought by the next day jump, even if the day in the regular release of the news will also have a jump, but can be set by the single or short position to avoid (b) the global market Foreign exchange market participants, countries of large and small banks, central banks, financial institutions, import and export traders, corporate investment departments, funds According to the "International Monetary Fund" statistics daily global turnover in the trillions of dollars, far more than the stock market trading volume (c) trading varieties less The foreign exchange market transactions are concentrated in the seven major countries or regions of the currency composition of the six varieties, namely, EUR / USD, GBP / USD, AUD / USD, USD / JPY, USD / CHF, USD / CAD, USD / CHF, USD / CHF, USD / CHF, USD / CHF, USD / CHF, USD / CHF, USD / CHF. USD/CHF, USD/CAD (d) the risk can be flexibly controlled because the average daily volatility of the foreign exchange market in about 1%, the brokerage firm provides leverage ratio is usually 100 times, so the average daily risk return in 1% to 100%, the risk level can be flexibly mastered (e) two-way trading, flexible operation can first buy and then sell, and also first sell and then buy, and buy and sell currency unlimited (this is an important difference with the real (F) high leverage ratio high leverage to facilitate the flexible establishment of positions, but high leverage is a double-edged sword (G) low transaction costs foreign exchange margin trading without commission, the bank or brokerage income from the spread (the same moment to buy and sell the spread), the spread is generally 3 to 5 points (except for the U.S. yen 1 point for 0.01, other varieties 1 point for 0.0001, that is, the spread is generally 3 to 5 points (except for the U.S. yen 1 point for 0.01, other varieties 1 point for 0.0001, that is, the spread is generally 3 to 5 points. Point for 0.0001, that is to say, one ten thousandth) In addition, overnight positions, such as holding high-interest currency, can enjoy interest; such as holding low-interest currency, must pay interest foreign exchange margin trading risk sources Although foreign exchange margin trading to its own many advantages and attract many people happy, but in the engagement of this kind of transaction (especially for the current domestic investors) will also face many risks (a) Leverage Because margin trading is leveraged trading, participants only pay a small percentage of the margin, so that the normal fluctuations in foreign exchange prices are magnified by several times or even dozens of times, engaged in margin trading in the acquisition of high returns at the same time also face high risk in the foreign exchange market long-term money is often a minority, losing money is the majority, part of the participants even lost their money (ii) lack of regulation First, because the foreign exchange market Is a global unified market, loose structure, no fixed trading venues, market regulators to implement monitoring of foreign exchange margin trading is difficult Secondly, the development of regulatory regulations in this field backward even in the relatively perfect law of the United States on this aspect of the targeted laws and regulations are still lacking, the United States on foreign exchange margin brokers and did not form an effective supervision, so in the United States under the name of foreign exchange brokers for foreign exchange Margin trading customers are not effectively protected at present, domestic investors can only through foreign brokers (including its domestic agents) for foreign exchange margin trading, and the need to remit funds to foreign countries, so whether the transaction or capital security are not effectively protected foreign foreign exchange margin trading advantages and disadvantages (a) advantages (1) low spreads general foreign exchange dealers to provide the spread of 3 to 12 points. The spread of the main currency for 3 to 5 points, and not according to the amount of money changes, compared to the real trading to much lower (2) provide leverage Margin trading due to its use of the margin mechanism, to provide the use of funds leverage ratio in general: 20: 1, 50: 1, 100: 1, 200: 1, 250: 1, 300: 1, 400: 1 so that the use of funds greatly improved efficiency (3) two-way operation Margin trading can not only buy more currency (that is, see the trading varieties to rise, first buy, then close the position and profit), but also short currency (is to see the trading varieties to fall, first sell, then close the position and profit) (4) profit space is large Although the volatility of the British pound a year only 10% to 20%, but in the margin trading provides leverage, the volatility of the British pound is equivalent to be magnified by 20 to 400 times so that the profit space is greatly increased (2) disadvantages (1) domestic government does not protect the domestic government currently does not protect foreign exchange margin trading, but foreign exchange dealers speculation in the country or region where the introduction of foreign exchange has their regulatory policies and protection policies, so will get their protection (2) the risk of short positions due to the mechanism of margin trading, if traders do not control the position, that is, if (3) Summary Margin trading is actually a more flexible way of trading, it provides more flexible trading tools If traders control well, these tools become the advantages of margin trading, greatly play the capital efficiency, increase profitability; if not controlled, it becomes the disadvantage of margin trading; if If the control is not good, it becomes the disadvantages of margin trading, resulting in large losses foreign exchange margin operation example Case 1 Suppose Mr. Wang and Mr. Qian both buy EUR/USD 1 million, buy price at 0.7400, sell price at 0.7600, but Mr. Wangs operation for the real trading, the capital needs 1000000 euros, and Mr. Qian using leveraged margin trading, the capital only needs 10,000 euros (assuming a margin ratio of 1%), then their profit is how much respectively?  Solution: Mr. Wang: 1,000,000 × (0.7600-0.7400) ÷ 1000000 = 2% Mr. Qian: 1,000,000 × (0.7600-0.7400) ÷ 10000 = 200% Case 2 Suppose in Case 1, Mr. Wang and Mr. Qian both bought EUR/USD 1,000,000, the buy price is 0.7600, the sell price is 0.7400. What is their respective losses?  Solution: Mr. Wang: 1,000,000 × (0.7400-0.7600) ÷ 1000000 = -2% Mr. Qian: 1,000,000 × (0.7500-0.7600) ÷ 10000 = -100% (because Mr. Qians principal is 10,000 euros, the loss to 100% will be forced to close the position) From the above two examples, we can easily find that The use of margin trading to operate, more leverage, and the maximum amount of loss is also the amount of margin, so margin trading makes investment more flexible