Foreign exchange is the exchange of one country’s currency with another.
Unlike other financial markets, the foreign exchange market has no specific location and no central exchange, but is traded through an electronic network of banks, companies and individuals.
Simply put, “forex trading” is the simultaneous purchase of one currency in a pair and the sale of the other.
Foreign exchange is traded in currency pairs, such as the common euro/dollar (EUR/USD) or dollar/yen (USD/JPY).
The Foreign exchange market, also known as the “Foreign exchange” or “FX” market, is the largest financial market in the world. On average, more than $1.5 trillion flows through it every day, which is more than 30 times the amount of all securities trading in the United States combined.
Foreign exchange transactions in the market are generally divided into the following two categories: 1. Basic foreign exchange transactions to meet the real needs of customers for trade and capital transactions; 2.
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 speculation needs.
The foreign exchange transaction we generally refer to is usually the second case, which takes foreign exchange as a financial trading tool to gain profits by earning the exchange rate difference, with the purpose of making profits in the fluctuation of foreign exchange price.
Because foreign exchange trading is not restricted by region, and the trading methods are complete, which is popular among investors, then what kinds of foreign exchange trading methods are available in the market now?
Which one do you fit into?
1. Cash transaction Cash transaction is generally to meet the real needs of customers, such as cash or foreign currency traveler’s checks to meet the needs of certain groups of people traveling abroad or on business trips.
2. Spot Foreign exchange Spot foreign exchange transaction is the transaction between big banks and big banks acting on behalf of big clients. After the transaction is concluded, the cash collection, payment and delivery shall be completed within two business days at the latest.
Another option for ordinary people is individual foreign exchange trading, which domestic banks offer to individuals and which is suitable for mass investors.
It refers to a transaction in which an individual commissions a bank to buy or sell one foreign currency to another based on the real-time exchange rate in the international foreign exchange market.
Now it has become the largest investment market in the country besides stocks.
3. Contract Spot contract Spot foreign exchange trading, also known as foreign exchange margin trading, deposit trading and virtual trading, refers to investors and financial companies specialized in foreign exchange trading (banks, dealers or brokers) who sign contracts to authorize foreign exchange trading and pay a certain percentage (generally no more than 10%) of the transaction margin.
You can buy and sell 100,000, hundreds of thousands or even millions of dollars of foreign exchange at certain financing multiples.
Thus, the buying and selling in this form of contract is merely a written or verbal promise to a certain price of a certain foreign exchange, and then waits for the price to rise or fall. The settlement of the buying and selling is made, and the profit is obtained from the changing price spread, but of course the risk of loss is also assumed.
As this kind of investment requires more or less capital, so, it attracts many investors to participate.
4. Futures Trading Foreign exchange futures trading is the buying or selling of a certain amount of another currency in dollars at a predetermined exchange rate on an agreed date.
Foreign exchange futures are bought and sold in special futures markets.
The main futures markets in the world are: Chicago Board of Trade, New York Mercantile Exchange, Sydney Futures Exchange, Singapore Futures Exchange, London Futures Exchange.
The futures market must consist of at least two parts: one is the trading market, 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.
The trading of foreign exchange futures is at least one contract, and the amount of each contract has different regulations in different currencies. For example, a contract of pound is 62,500, yen is 12,500,00, and euro is 125,000.
After that, Parkway Australia will continue to bring you other knowledge points of foreign exchange trading, you are welcome to continue to follow and discuss together
