A market is a financial market where transactions are dispersed around the world.
With the exception of Saturdays, Sundays and major holidays in the country where the trading center is located, financial centers around the world operate sequentially according to their location, enabling foreign exchange markets to buy and sell various currencies around the clock.
According to a survey conducted every three years by the Bank for International Settlements, the average daily trading volume in the global foreign exchange market was 6.6 trillion dollars in April 2019, up from 5.1 trillion dollars in 2016.
Participants The foreign exchange market is the most liquid financial market in the world.
Participants include large banks, central banks, institutional investors, currency speculators, corporations, governments and other financial institutions and retail investors.
The UK accounted for 36.7 per cent of the total value of transactions, making the UK the most important centre in the world.
The United States (17.9 percent) and Japan (6.2 percent) ranked second and third, respectively.
Unlike the stock market, the foreign exchange market is divided into different levels.
The highest level is the interbank market, which consists of the largest commercial and investment banks.
Trading in the interbank market is very small and unknown to participants outside the market.
Due to the rise in number and importance, the number of individual speculative traders in the market is increasing.
Currently, they are indirectly involved in currency pairs and their quotes through brokers or banks. One currency is always traded with another currency.
Thus, each currency pair constitutes a separate transaction variety, traditionally labeled XXXYYY or XXX/YYY, XXX and YYY reference currency ISO 4217 international three-letter code.
The first currency is (XXX) and is quoted by the second currency (YYY), which is called the relative currency (or quoted currency).
For example, 1.54650 refers to the quote against the US dollar, that is, 1 euro =1.54650 US dollars.
A currency containing the US dollar and another currency is used symmetrically as a direct currency pair, for example (EURUSD).
A currency pair that does not contain the dollar is called a cross, such as the euro EURJPY.
Currently, currency pairs are quoted in essentially six digits, with the smallest unit of count called a dot or step.
In traditional news media, it is often described in terms of dots.
One point is equal to 10 smaller points or 10 moves.
Each currency pair has two prices: the ASK price and the ASK price.
The difference between buying and selling is the point spread.
You can see the point spread directly in the /5 trading software. The point spread is calculated in steps. Take the euro/US dollar as an example, it is 1.17151 and 1.17171 at a certain time.
At this point, the point difference is 20 steps.
When markets are active and liquidity is abundant, spreads are usually small and stable.
When the market is not active, such as in the morning, the spread usually widens.
When data releases and major events occur, markets are volatile and spreads widen.
Special attention should be paid during the transaction.
When you are long a currency pair, you trade at the bid price and close the position at the ask price.
When you short a currency pair, you trade at the ask price, and when you close the position, you trade at the bid price.
Note that the K plot is based on the asking price, which requires adding the current spread or querying the historical quotation.
Actual leverage Margin leverage is not the actual leverage that you trade. Actual leverage = contract value/principal When your principal is $10,000, let’s say the dollar/yen is 110.000, and you start trading first hand, the contract value is $100,000.
At this point, your real leverage ratio is $100,000 / $10,000 =10 times.
(Light position) When your principal is $1000, assuming that the USD/JPY is 110.000, then you start trading one hand, the contract value is $100,000, and your effective leverage ratio is $100,000 /1000 dollars =100 times.
(Full position) When your principal is $100,000, assuming that the dollar and yen are 110.000, you start trading on one hand, with the par value of the contract being $100,000.
At this point, your actual leverage ratio is $100,000 / $100,000 =1 times.
(No leverage) It is recommended to reduce your actual leverage to less than 10 times in the actual trading process, light trading.
