Explanation:
The international financing multiple or leverage ratio is between 2 times and 4 times, and the standard contract in the foreign exchange market is 1, yuan per lot (referring to the base currency, which is the previous currency of the currency pair). If the leverage ratio provided by the broker is 2 times, the buyer and seller need a margin of 5, yuan (if the currency of the transaction is different from that of the account margin, it needs to be converted); If the leverage ratio is 1 times, the buyer and seller need 1 yuan margin. The reason why banks or brokers dare to provide a larger financing ratio is because the daily average fluctuation 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 completely resist market fluctuations with less margin from investors without taking risks themselves. 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 it is voluntarily or forcibly closed.
Foreign exchange margin:
Advantages:
Foreign exchange margin is the freest, fairest and most advanced trading method in all financial markets in the world today. Its advantages are as follows:
1. 24-hour trading
It is convenient to enter and exit at any time from Monday to Friday, avoiding the risks caused by gaps every other day, even though news will be released regularly during the day. 24-hour trading also gives office workers plenty of time to invest and make profits. Especially, the active period of the foreign exchange market is relatively concentrated from 3 pm to 11 pm, which is just in time with the domestic stock and futures markets, which provides convenience for domestic office workers to engage in this most free "second job". If they are doing long-term orders, it is more worry-free and labor-saving.
2. Global market
The participants in the foreign exchange market include large and small banks, central banks, financial institutions, import and export traders, investment departments of enterprises, fund companies and individuals. According to the statistics of the International Monetary Fund, the daily global turnover 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, where quotes, data and news are open, and investors can obtain relevant information at the same time.
3. There are few kinds of transactions
The transactions in the foreign exchange market are concentrated on six kinds of currencies of seven countries or regions, namely, Euro/USD, Pound/USD, AUD/USD, USD/JPY, USD/CHF and USD/CAD. And the variety has strong linkage, which makes it easy to concentrate on investment analysis.
4. Risk can be flexibly controlled
Because the daily average volatility of the foreign exchange market is around 1%, the leverage ratio provided by brokers is usually 1 times, so the daily average risk-return ratio is between 1% and 1%, and the risk level can be flexibly controlled by oneself. Novices can start with 1% risk-return ratio and gradually increase the risk-return ratio after entering a stable profit state. For example, if an investor opens an account in 1(1K yuan, he will only trade 1, yuan (1k) at the beginning of trading, which will control the risk at 1%. In addition, margin trading can be treated as a firm offer.
5. Two-way trading, flexible operation
You can buy first and then sell, or sell first and then buy, and the buying and selling currency is not limited (this is an important difference from the firm offer), of course, it is also T , and you can do short-term repeatedly in the day. Trading can preset limit orders and stop-loss orders to keep profits and control losses.
6. High leverage ratio
High leverage facilitates the flexible establishment of positions, but it 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, which makes it possible to realize profiteering.
7. Low transaction costs
There is no commission for foreign exchange margin trading, and the income of banks or brokers comes from the spread (the spread between buying and selling at the same time), which is generally 3-5 points (except for USD/JPY, which is .1 at 1 point, that is to say, .1 at 1 point). In addition, overnight positions, such as holding high-interest currencies, can enjoy interest; If you hold low-interest currency, you need to pay interest. Generally speaking, the transaction cost is very low.
8. The entry threshold is low.
You can open an account by fax and online to participate in foreign exchange margin trading, and the procedures are simple. Various foreign exchange brokers have different regulations on the minimum amount of funds for margin account opening, mostly ranging from several hundred dollars (mini account) to several thousand dollars (standard account). It can be said that the success of foreign exchange trading does not depend on the amount of funds, but depends on the level of operation. Small funds can grow rapidly, which provides another battlefield for working-class people to realize their dream of wealth.
Disadvantages
Then, the disadvantages of foreign exchange margin trading:
It is easy to lose money, lose money quickly and lose a lot. You can earn 1 thousand in half a day, or you can lose 1 thousand in half a day In short, risk is always in direct proportion to income.
if you want to make money from the futures market, such as the foreign exchange market, you must first have enough rich and solid financial knowledge, and then you can make money from it!
foreign exchange margin trading adopts the leverage principle, and traders can make use of the characteristics of capital amplification to quickly accumulate their wealth through the correct trading methods. This wealth-enlarged trading method is being accepted by more and more foreign exchange investors.