Introduction to foreign exchange margin trading

Foreign exchange margin trading, also known as virtual trading and margin trading, is that investors use equity funds as guarantees to carry out foreign exchange transactions from the financing provided by banks or brokers, that is, to enlarge the investor's trading funds. The proportion of financing is generally determined by the bank or broker. The larger the proportion of financing, the less money the customer needs to pay.

The international financing multiple or leverage ratio is between 20 times and 400 times.foreign exchange marketThe standard contract is 100,000 yuan per lot (referring to the base currency, which is the previous currency of the currency pair). If the leverage provided by the broker is 20 times, the margin required for buying and selling a lot is 5,000 yuan (if the currency traded is different from the account margin currency, it needs to be converted); if the leverage ratio is 100 times, the margin required for buying and selling a lot is 1,000 yuan. The reason why banks or brokers dare to provide a large proportion of financing is because the average daily volatility of the foreign exchange market is very small, only about 1%, and the foreign exchange market is a continuous transaction. Coupled with perfect technical means, banks or brokers can use investors' less margin to withstand market fluctuations without having to bear their own risks. Foreign exchange margin belongs to spot trading, and has some characteristics of futures trading, such as buying and selling contracts and providing financing, but its position can be held for a long time until its own initiative or forced position squaring.

Forex margin is the most free, fair and advanced trading method among all financial marekts in the world today. Its advantages are as follows:

1. 24-hour trading

From Monday to Friday, 24 hours a day continuous trading, easy to enter and exit at any time, to avoid the risk of the next day gap, although the day in the event of regular release of news will also have a gap, but can be avoided by pre-order or short position. 24-hour trading also gives office workers ample time to invest and profit, especially the active period of the foreign exchange market is relatively concentrated from 3:00 pm to 11:00 pm, just with the domestic stock and futures market from time to time, for the domestic office workers engaged in this most free "second occupation" to provide convenience, if it is to do long-term single, it is more worry and effort.

2. Global market

The participants in the foreign exchange market include large and small banks, central banks, Financial Institution Groups, import and export traders, investment departments of enterprises, fund companies and individuals. According to the statistics of the "International Monetary Fund", the daily global trading volume is close to 2 trillion US dollars, so as a global market, it is impossible to be manipulated by some people or institutions. One is to facilitate technical analysis, and the other is to facilitate the entry and exit of large funds. There is also a high degree of transparency in the foreign exchange market. Quotes, data and news are open, and investors can obtain relevant information at the same time.

3. Fewer trading options

Trading in the foreign exchange market is concentrated on six varieties composed of currencies from seven major countries or regions, namely EUR/USD, GBP/USD, AUD/USD, USD/JPY, USD/CHF, USD/CAD. And each variety is highly linked, which makes it easy to concentrate on investment analysis.

4. Risk can be flexibly controlled

Because the average daily volatility of the foreign exchange market is around 1%, the leverage provided by brokers is usually 100 times, so the average daily risk-return is between 1% and 100%. The risk level can be flexibly controlled by yourself. Beginners can start with 1% risk-return, and gradually increase the risk-return ratio after entering a stable profit state. For example, investors pay 1,000 yuanaccount openingIf you start trading only 1000 (1K), you can control the risk at 1%. In addition, you can also use margin trading as a real order.

5. Two-way trading, flexible operation

You can buy first and then sell, or you can sell first and then buy, and the trading currency is not limited (this is an important difference from the real offer), of course, it is also T + 0, and you can repeatedly do short-term within the day. You can preset limit orders and stop-loss orders to keep profits and control losses.

6. High leverage ratio

High leverage makes it easy to build positions flexibly, but high leverage is a double-edged sword. For high-level investors, under the premise of strictly controlling risks, profits or floating profits can continue to use high leverage to increase positions, providing the possibility of achieving huge profits.

7. Low transaction costs

There is no commission for foreign exchange margin trading. The income of a bank or broker comes from the spread (the difference between buying and selling at the same time), which is generally 3-5 points (except for 1 point of USD/JPY, which is 0.01, 1 point of other varieties is 0.0001, which means one ten thousandth). In addition, if you hold a position overnight, you can enjoy interest if you hold a high-interest currency; if you hold a low-interest currency, you need to pay interest. Overall, transaction fees are very low.

8. Low entry threshold

To participate in foreign exchange margin trading, you can open an account through fax and the Internet, and the procedures are simple. Foreign exchange brokers have different regulations on the minimum amount of funds to open a margin account, mostly between a few hundred dollars (mini account) and a few thousand dollars (standard account). It can be said that the success of foreign exchange trading does not depend on the amount of funds, but on the level of operation. Small funds can grow rapidly, providing another battlefield for the working class to realize their dreams of wealth.

So, what are the disadvantages of foreign exchange margin trading? If you don't know how to control risks reasonably, it's easy to lose, lose fast and lose a lot. You can make 10,000 in half a day, and you can lose 10,000 in half a day. Of course, good money management can help you avoid this risk without losing profits. In short, risk is always proportional to return.