Analysis of Core Characteristics and Operation of Foreign Exchange Real Trading

What is foreign exchange real trading?

The transaction in which a customer converts a freely convertible foreign exchange (or foreign currency) held by himself into another freely convertible foreign exchange (or foreign currency) through a domestic commercial bank is usually referred to as a "foreign exchange real transaction".

In foreign exchange trading, there is a distinction between "real" and "virtual", in which "virtual" refers to foreign exchange margin trading. Compared with margin business, due to the lack of capital leverage, the absolute return of foreign exchange real trading depends more on the scale of invested principal. In addition, foreign exchange real trading is a one-way profit model, and the main income comes from the exchange rate difference between buying and selling currencies.

According to the Bank for International Settlements, the world's daily foreign exchange trading volume is about 1.90 trillion US dollars. When you expect a freely convertible foreign exchange (or foreign currency) to rise relative to your current holdings of freely convertible foreign exchange (or foreign currency) over a period of time, you can convert your holdings into currencies that are expected to appreciate, thereby making a profit on the exchange rate difference.

Features of foreign exchange real trading:

The foreign exchange real transaction currencies provided by domestic commercial banks mainly include US dollars, euros, British pounds, Japanese yen, Swiss francs, Canadian dollars, Australian dollars, Hong Kong dollars, etc. These currencies are all freely convertible currencies. Foreign exchange real transaction does not support transactions involving non-freely convertible foreign exchange (or foreign currencies). It is recommended that you consult which currencies are convertible.account openingBank.

When conducting real foreign exchange transactions, if the exchange is between US dollars and another freely convertible foreign exchange (or foreign currency), this transaction is customarily called a "straight transaction"; if the exchange is between two freely convertible foreign exchange (or foreign currency) other than US dollars, it is called a "fork transaction".

In the exchange rate representation, the base currency comes first, the target currency comes back, and the middle is separated by "/", indicating how much a unit of the base currency can be exchanged for the target currency. There are two ways to quote exchange rates involving the US dollar: those with the US dollar as the base currency are called "direct quotes", such as the US dollar against the Japanese yen; those with the US dollar as the target currency are called "indirect quotes", such as EUR/USD.

Real foreign exchange transactions use T + 0 clearing method. After the customer completes the transaction, the banking system automatically completes the delivery of funds immediately. This means that when the market fluctuates, investors can seize multiple profit opportunities in one day.

Benefits for beginners in foreign exchange:For beginners in foreign exchange, it is often difficult to choose among multiple currency pairs.TickmillIt is recommended that new foreign exchange investors generally choose the US dollar as their investment currency. This is because the US dollar is highly liquid and the most widely used currency in the world. More importantly, there are many sources of data and information on the US dollar in the market, which is convenient for beginners to grasp more information and make market judgments and investment decisions in a timely manner. Holding small currencies makes it more difficult to obtain information and often difficult to judge in a timely manner. Of course, if there is an actual demand for a certain currency, investors should also make a choice according to their own situation. For example, if their children are studying in Europe, they can use the euro as an investment currency and other currencies as tools, so that while making profits in foreign exchange trading and investment, they can also avoid the exchange rate risk of the euro itself.