Foreign exchange basics how to trade foreign exchange

forexbrokerrebateprogram 2023/2/24 20:50:06 6Views

Currency and foreign cashback forex market currency pairs are currently more than 170 k forex broker rebate programds of currencies around the world, but we commonly see only about 10 kinds of foreign exchange market autorebateforex large and invisible market, it is difficult to have the exact statistics on the international foreign exchange market and foreign exchange transactions more authoritative statistics from the Bank for International forexrebatebestettlements every three years report in September 2013, the Bank for International Settlements issued a "triennial Central Bank Survey Report April 2013 Global Foreign Exchange Transaction Statistics Preliminary Results" report shows that in recent years the global foreign exchange market trading volume showed significant rapid growth in the average daily trading volume from 3.3 trillion forexbrokerrebateprogram.S. dollars in April 2007, rose to 4.0 trillion U.S. dollars in April 2010, April 2013 reached a record high of 5.3 trillion U.S. dollars in each transaction Among the currencies, the U.S. dollar continues to maintain the leading position in foreign exchange transactions, the rapid rise in the proportion of the yen, the proportion of the euro fell the most, the proportion of the British pound continued to decline for 10 years, the proportion of the Australian dollar to catch up with the Swiss franc Generally speaking, the investment market will be the most commonly traded currencies in the world called the major currencies, the current major currencies are: U.S. dollar (USD), the euro (EUR), the yen (JPY), the British pound (GBP), the Swiss franc ( CHF), Australian dollar (AUD), Canadian dollar (CAD) other than the major currencies are called secondary currencies from the definition of foreign exchange can be learned, foreign exchange is the exchange between the two currencies therefore, foreign exchange transactions must be composed of two different countries currencies, become a currency pair for example, the euro against the U.S. dollar, the British pound against the Australian dollar are currency pairs straight and cross plate each currency and another currency can be Form a currency pair, containing the U.S. dollar currency pair is generally known as the straight plate, that is, a currency against the U.S. dollar direct exchange rate of the major currencies against the U.S. dollar straight plate is generally known as the major currency pairs Therefore, the major currency pairs in the market include: EURUSDEURUSDUSDUSDUSDJPYUSDJPYGBPUSDAUDUSDUSDUSDCHF USDCHFUSDUSDCADUSDCAD The above currency pairs can also be used / instead of against, written as: EURUSDUSD/USDJPYGBPUSDAUDUSDUSD/CHFUSDCAD The currency pairs that do not include the U.S. dollar are called crosses, because most international trade settlements are settled in U.S. dollars, a currency if converted into another non-U.S. dollar currency, need to be based on this The two currencies are exchanged against the U.S. dollar exchange rate, so called the cross-board The main cross-board is listed below: EUR cross-board GBP cross-board JPY cross-board EUR/CHF GBP/CHF EUR/JPY EUR/GBP GBP/AUD GBP/JPY EUR/CAD GBP/CAD CHF/JPY EUR/AUD AUD/JPY CAD/JPY The main currency characteristics are introduced USD (USD): the U.S. currency, the issuing authority belongs to the U.S. Treasury, for the specific issue is the U.S. Federal Reserve Bank (Federal Reserve) The U.S. dollar is the most dominant foreign exchange in the international foreign exchange market According to the Bank for International Settlements statistics, in 2013 the U.S. dollar accounted for 87% of the average daily volume of global foreign exchange transactions, compared to April 2010, an increase of 2 percentage points U.S. dollars The ratio had peaked in 2001, the The proportion of transactions reached 89.9%, then declined slightly, and rebounded after 2010 Overall, the dollars share in global foreign exchange transactions is far ahead, fluctuating above and below 85%, about 2.5 times that of the euro The dollars position in the international arena is also reflected in the following aspects: 1) the dollar is the main asset of the reserves of central banks around the world; that is, the foreign exchange reserves of countries are mainly composed of dollars; 2) the main global transactions Commodities are almost all dollar-denominated, dollar settlement; 3) the vast majority of international debt instruments are dollar-denominated Euro (EUR): the eurozone currency, January 2002 the euro officially circulated in July 2002 to become the only legal tender in the eurozone original eurozone countries currencies, such as the German mark, the French franc, etc. no longer use the euro is the worlds second largest trading currency, the After the U.S. dollar Since 2001, the euro has been ranked No. 2 in the global total foreign exchange transactions from 2001 to 2007 its average daily trading volume market share basically remained at about 37%, reaching a peak of 39.1% in 2010 but the Bank for International Settlements statistics in 2013 showed that the euro accounted for a significant decline, only 33.4%, down from 2010 5.7 percentage points, is the worlds major currencies in the largest decline in the currency yen (JPY): Japans currency, issued by the Bank of Japan, according to the Bank for International Settlements data, the yen in the global foreign exchange transactions ranked No. 3 in the total volume of the past three years, in the worlds major currencies, the yens trading volume increased by 63% in 2013 compared to 2010, of which only the yen / dollar trading volume surged by 70% of the average daily volume of global foreign exchange transactions of the yen in 2013 rose from 19% in 2010 to 23%, an increase of 4 percentage points, more than the increase in other major currencies such as the U.S. dollar and the euro International trade is vital to Japan because on the one hand, Japan is completely dependent on imports of energy, on the other hand, manufacturing exports are an important support for the Japanese economy Therefore, the yen exchange rate in Japans economic development plays Key role in the major economies, the Bank of Japan is the most frequent intervention in the exchange rate of its own currency central bank 2. How to foreign exchange transactions For example: buy the currency pair AUDUSD; assume that the current Australian dollar interest rate of 4.75% per annum, the U.S. interest rate of 0.25% per annum then hold AUDUSD long to obtain a swap fee of 4.75% - 0.25% = 4.5% per year. Get swap fees 0.012% per day trade size and profit and loss calculation we explained above the currency, currency pairs, quotes, spreads and other basic concepts of foreign exchange trading, but also listed the strength of foreign exchange trading then, the profit and loss of each transaction is ultimately as calculated? To answer this question, first of all, you also need to understand the concept of position 1) position so-called position, the size of a transaction is the size of the foreign exchange contract unit is the lot (Lot) can be subdivided into standard lot, mini lot, micro lot and nano lot a standard lot represents 100,000 (100,000) units of base currency for example, trading a standard lot of AUDUSD, which means that 100,000 AUDUSD For example, trading a standard lot of AUDUSD means converting 100,000 AUDUSD into USD mini lot is 1/10 of a standard lot, i.e. 0.1 lot, which is equivalent to 10,000 base currency units micro lot is 1/100 of a standard lot, i.e. 0.01 lot, which is equivalent to 1,000 base currency units nano lot is 1/1000 of a standard lot, i.e. 0.001 lot, which is equivalent to 100 currency units Suppose you are currently bullish on USDCHF and are ready to buy 0.5 lots If you use a leverage of 200:1, you only need to use $250 (50,000/200) to trade, and micro-lot trading and nano-lot trading is a lower trading threshold trading 1 micro lot (0.01 lot) dollar against the yen need 1,000 U.S. dollars, in 500 times the leverage, only 2 U.S. dollars can be traded so compared to other investment varieties, foreign exchange trading position size is very flexible 2) profit and loss calculation We previously mentioned that the profit and loss of foreign exchange trading will be expanded according to the use of leverage How is the profit and loss of each transaction specifically calculated?  In foreign exchange trading, the offer to the U.S. dollar as the offer currency, that is, the U.S. dollar in the currency pair behind the profit and loss calculation is relatively straightforward in this type of transaction, 1 point of the equivalent of 10 U.S. dollars For example, the euro against the U.S. dollar current offer of 1.36615 (sell price)/1.36632 (buy price), to the current price to buy 1 standard lot, the opening price of 1.36632 (buy price); then sell the euro to close the position when the price rises to 1.37882 (sell price)/1.37596 (buy price), close the position at 1.37882 (sell price) in this transaction a total profit of 1.37882-1.36632 = 0.01250, that is, 125 points Since the value of each point is 10 U.S. dollars, so the final profit of this transaction 125 * 10 U.S. dollars = 1250 U.S. dollars In the U.S. dollar as the base currency trading, the algorithm is relatively complex because at this time the value of 1 point is not fixed for 10 U.S. dollars For example, the U.S. dollar against the yen current offer 101.958 (sell price)/101.976 (buy price), to the current price to buy 1 standard lot, the opening price of 101.976 ( Buy price); then sell to close the position when the price rises to 102.676 (sell price)/102.688 (buy price), close the position at 102.676 (sell price), at this time profit 102.676-101.976 = 0.700, that is, 70 points However, at this time the 70 points for the yen, but also need to be converted into U.S. dollars Therefore, the U.S. dollar as the base currency trading profit and loss is calculated as follows: ( Close price - open price)/Close price * transaction size In the above example of USDJPY trading, the final profit for (102.676-101.976)/102.676 * 100,000 = $681.75 Please note that the above only calculate the profit or loss arising from the rise or fall in the exchange rate, does not take into account other transaction costs such as overnight interest control margin Risk and Margin Call Through the example in the previous section we can see that buying a standard lot of EURUSD and taking profits after rising 125 pips can earn you $1,250 in the foreign exchange market, where exchange rates fluctuate 125 pips in a few hours, or even minutes, is a common market and the trading capital you need to pay, depending on the leverage, could be as little as $200 or $500  Using $200 to make $1250 in a few minutes is the attraction of the forex market however, the risks involved cannot be ignored if you buy EURUSD and then the market goes down instead of up, you face an equally large loss in the trade, the investor uses $200 margin to trade 1 standard lot ($100,000), the profit and Losses will also be calculated in 1 standard lot trading 1 standard lot of EURUSD, 1 point is worth $10, that is, as long as the price moves 20 points in the opposite direction of the opening position, you will lose $200 of trading capital, and if the market continues to develop in an unfavorable direction, your account funds will continue to decrease until it is reduced to the level set by the trader forced to close the position, at which point you may When an investors trading strategy goes wrong, resulting in a decline in account funds to the point where it is difficult to maintain the current position, the dealer will issue a margin call to the investor, which requires the investor to deposit more margin into the account in order to maintain the current position If the investor fails to deposit additional margin into the account on time, his position may be Therefore, avoiding unmanageable losses is an important point in margin trading and setting a stop loss is a very effective tool to control the range of losses. The system will automatically close the position once the loss reaches the set value, the loss of each transaction is controlled within a predetermined range The usefulness of the stop loss is to avoid the risk of potentially larger losses in the current transaction; at the same time also for the next transaction to save the funds and the stop loss is the opposite of take profit, take profit is only to set the maximum profit range of the transaction, once the profit reaches the set value, the system will automatically take profit to close the market as the market is always in volatility, once the market reverses, the existing profit may quickly disappear. The Take Profit setting can help lock in profits and reduce potential losses due to market volatility.
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