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What is the mechanism of foreign exchange short selling?

There are many types of investments with short-selling mechanisms in foreign countries. The relatively mature and popular investment varieties with short-selling mechanisms in China at this stage are mainly gold and foreign exchange.

Gold investment has gone through four stages: physical gold, paper gold, futures gold and spot gold. It also represents the four methods or types of gold investment. Among them, the methods with short-selling mechanism are futures gold and spot gold.

Futures gold is a standardized contract that stipulates the delivery of a certain quantity and quality of gold at a specific time and place in the future. The only variable is the price, which is generated through open bidding on the futures exchange. Gold futures can play its "financial leverage" function, reducing capital investment for investors and increasing return on investment.

In addition, gold futures can be both long and short, giving investors the opportunity to choose in both directions. When the market is bullish or bearish, it can bring returns to investors. However, due to the limitation of the delivery period, in addition to the increasing margin ratio, gold futures also face the choice of whether to close the position before expiration. If you do not choose to close the position, physical gold must be delivered at expiration.