The value and advantages of foreign exchange investment are mainly determined by the characteristics of foreign exchange itself, so that no matter how old it is, its quality will not change and its value will last forever.
To be specific, the investment value of foreign exchange has unique advantages in such aspects as resisting inflation, maintaining and increasing value, fair trading without time limit and convenient physical delivery and collection.
Here are eight advantages of foreign exchange investment: 1. All-weather foreign exchange market The foreign exchange market is different from other markets mainly because of its global nature and dispersion.
In essence, it is an over-the-counter (OTC) market.
In this market, the various foreign exchange transactions distributed around the world form a unified and interconnected market whole.
One of the benefits of this market is that all currencies can be traded electronically 24 hours a day, as major global markets open, close and close at all times.
In addition, the time of foreign exchange trading is also very favorable for Chinese investors. The prime time of foreign exchange trading is from 8:00 to 12:00 in the evening of Beijing time, during which the European and American markets are the most active and the exchange rate fluctuates the most.
In this period, Chinese investors have more abundant time to invest in foreign exchange trading.
2. Liquidity in the foreign exchange market The liquidity of capital in the foreign exchange market is very strong.
It operates a T+0 system (two-way trading, buy as you go) and is easy to cash in.
Foreign exchange investors can react to the specific circumstances at the time.
Investors can be flexible about the timing of entry or exit.
The first thing most investors are told when they first hear about the foreign exchange market is the sheer size of the global system.
In addition to its sheer size, the foreign-exchange market has a level of liquidity almost unimaginable in any other financial market, as Figure 1-6 shows.
Compared with the foreign exchange market in terms of size and trading volume, other financial markets are far inferior, such as poor liquidity, difficult transaction in the futures market in many cases, and easy to control and control the price.
At the same time, it is extremely difficult for any market participant to manipulate the foreign exchange market artificially due to the incredibly high volume of trading and the large number of traders involved in the market.
3. Low transaction costs of foreign exchange Under normal market conditions, small transaction costs, that is, the spread between bid and sell prices is generally less than 0.1%.
At larger dealers, investors can get spreads as low as 0.07%; now they typically get spreads of three to five points.
Of course, fees also depend on how leveraged investors are.
For example, investors have to pay brokerage commissions and trading services in the stock market.
The OTC structure of the forex market reduces transaction expenses by eliminating most of the transaction and settlement costs.
Transaction costs can be further reduced because the efficient purely electronic trading system allows investors to trade directly with market makers, eliminating many bills and middleman fees.
4. Relatively High leverage in foreign exchange trading Margin trading uses the principle of leverage to operate in the foreign exchange market in the way of expanding the credit limit.
At present, foreign exchange margin trading is leveraged up to 400 times the principal.
In the stock market, investors can only control a maximum of $2,000 worth of stock for every $1,000 invested, and the maximum leverage ratio is 2:1.
However, in the foreign exchange market, if the investor invests $1000 in the foreign exchange trading, the maximum amount can be controlled up to $400,000, as shown in Figure 1-7.
In foreign exchange trading, a small margin account can control a larger total contract value.
Thus, leverage gives traders the ability to make substantial profits while minimizing capital risk.
For example, a trader offering 200:1 leverage means that a $50 margin can buy or sell $10,000 worth of a currency.
Similarly, a $500 deposit can be used to trade $100,000 worth of a certain currency, etc.
Figure 1-7 Leverage principle Corresponding to this, securities trading generally does not involve margin trading, while futures trading does involve margin trading, but its leverage ratio is much lower than that of foreign exchange trading.
Experts remind to pay attention to: foreign exchange margin trading is a double-edged sword, if done well, investors can get very large investment returns;
But if risk management is not done well, investors will suffer very heavy losses.
5. High transparency of foreign exchange market The foreign exchange market has a huge volume of trading every day, and it is a global market. Its online trading platform is advanced and scientific, and market prices and data are open to the public.
And stock investment due to regional restrictions, the market is relatively small, the stock price is easy to be manipulated by human factors.
Foreign exchange can be bought up or down. As long as you choose the right trading direction, you can buy and sell at any time. You can make money both up and down.
While most stocks can only be bought up, when the stock is falling, the market is depressed, there is no trading to do, has bought the stock, can only sit idly by its change or liquidation.
At the same time, stock investment opportunities are not easy to grasp, do not have long-term investment value.
7. Foreign Exchange trading facilitates rapid trading. Foreign exchange trading allows you to buy or sell several currency contracts at the same time.
However, stock trading is carried out in the form of pairs, which must be traded in turn. When it rises, the more you buy, the more expensive it becomes. It is impossible to buy a large number of stocks at the same price.
When it falls, the more it sells, the lower it is, even when it is unable to be bought or sold by the daily limit or the daily limit.
8. Foreign exchange currency types are easy to choose Compared with other investment methods, from the perspective of choice, there are not many currency types in foreign exchange trading.
Take spot forex trading as an example. There are only dozens of globally traded currency pairs in the trading, among which there are only four most important currency pairs, which are easy to choose and easy to observe after buying or selling.
