Forex overview

Foreign exchange introduction

Although the foreign exchange market is the financial market with the largest trading volume in the world, compared with traditional financial products such as stocks, futures and bonds, foreign exchange is still a relatively new investment product for individual investors. This is because most investors lack a deep understanding of the foreign exchange market and an understanding of fluctuations in the foreign exchange market. Unlike traditional securities and futures products traded on the New York Stock Exchange and Chicago Mercantile Exchange, foreign exchange is a global 24-hour trading financial product. Foreign exchange transactions start at New Zealand time every day, and start trading according to the time difference between Asia, Europe and America. Previously, only banks and non-bank financial institutions carried out large transactions in the foreign exchange market with a view to obtaining speculative profits or balancing interest rate risk between currencies. The global foreign exchange market has grown very rapidly in the past few years. As a powerful foreign exchange broker, we are honored to provide a stable and reliable foreign exchange trading platform for major financial institutions such as funds, asset management, wealth management and individual investors.

What is foreign exchange trading?

For active investors and traders, foreign exchange trading is similar to other financial investment products such as stocks, commodity futures and bonds. Due to today's economic globalization, regional economic alliances, and foreign exchange trading as part of your investment portfolio, it will help balance investment risks and increase income opportunities.

Like financial products such as futures, foreign exchange trading allows investors and traders to buy Long or Short currency combinations such as: Euro / USD, USD / JPY, GBP / USD, etc.

The price of a currency combination represents the value of one currency relative to another currency, and it reflects the relative market value of the two currencies at that time. The political and economic factors of the currency country will affect the value of the currency.

If a country ’s inflation rate / interest rate is relatively stable and relatively low, and its GDP is strong, positive factors such as the country ’s political stability will positively affect the value of the currency. Based on the study of the volatility of foreign exchange prices, fund allocation management and trading discipline, successful investors will benefit from foreign exchange transactions. (Risk warning)

Liquidity of currency transactions

Just like securities and bonds, the liquidity of currencies varies. The highly liquid currency refers to the 7 countries with the most stable political and economic stability, namely the United States, Japan, the United Kingdom, France, Germany, Italy, and Canada. After the EU began to issue euros, the most liquid currencies were the US dollar, Japanese yen, British pound, euro, and Canadian dollar. The trading volume of these five foreign currencies accounts for 80% of the global foreign exchange daily trading volume.

The currency symbol is generally composed of 3 English letters. The first two letters represent the country ’s name abbreviation, and the third letter represents the country ’s currency name.

National flag symbol Currency name
  USD US dollar
  CAD Canadian dollar
  NZD New Zealand Dollar
  AUD Australian dollar

The exception is the EUR, which does not represent the country, only the symbol of the euro. The combination of the Euro and the US dollar is expressed as EUR / USD.

Base currency and target currency

In the foreign exchange market, the exchange rates of the two currencies appear in pairs. The base currency is in the front, the target currency is in the back, separated by "/" in the middle. When calculating the price of the pair of currencies, the base currency is an invariant constant and the target currency is an exchange rate variable. The Euro EUR is the base currency relative to all other trading currencies, such as: EUR / USD, EUR / GBP, EUR / CHF, EUR / JPY, EUR / CAD, etc. Pound sterling is the base currency for other currencies than EUR, such as: GBP / USD, GBP / CHF, GBP / JPY, GBP / CAD. EUR / GBP only for the euro.

Monetary value

For example, in EUR / USD, the base currency is EUR. If an investor buys 100,000 EUR / USD, then he buys 100,000 euros and sells dollars. No matter how the exchange rate changes, the value of 100,000 EUR remains unchanged. However, the target currency, the US dollar, will change in value as the exchange rate fluctuates.

Currency exchange rate quotation unit, the fourth digit after the smallest accurate decimal point, called pips. Foreign exchange uses pips to reflect price changes, because usually foreign exchange transactions can provide a high leverage ratio, which causes the actual transaction funds to be amplified, and small changes in prices will generate profits and losses.

Provide a default leverage ratio of 1: 200 for standard accounts. If you trade at this rate, with a EUR / USD exchange rate of 1.14000, a contract of 100,000 Euros requires a deposit of 500 USD. 100,000 EUR = 114,000 USD, 114,000 / 500 = 228, so the precise leverage provided by the currency pair EUR / USD is 228 times.

USD value = 1.14x base currency face value = USD 114,000
The pip value of the above transaction can be calculated according to the following formula:
USD value = 1.14x base currency face value = USD 114,000

Basic knowledge of foreign exchange transactions

Foreign exchange buying and selling

In reality, you make buying and selling when it is practical. For example: You submitted EUR / USD at the price of 1.14000, which means that you bought Euro and sold USD at 1.14000. If the exchange rate of the euro to the dollar rises, your transaction is profitable.

If you encounter a situation where you cannot trade through the platform, please call to place an order through our company's trader. You need to provide information in the following format:
"I buy 100,000 Euros and sell the dollar at the Market" OR
"I buy 500,000 EUR/USD on a 1.15000 stop" OR
"I buy 100,000 Euros vs. the Dollar at the market"

Please note that if you place an order through a trader, please note that you must specify the transaction value, currency combination, exchange rate price, and buying and selling order (market price, limit price or stop price).

Buy / sell price

Just like other financial product transactions, the quotation of foreign exchange consists of the purchase price and the selling price. The buying price refers to the price of the dealer's buying currency. The selling price is the price of the market maker's selling currency. For traders, the opposite is true. The market maker's buying price is the trader's selling price, and the market maker's selling price is the trader's buying price.

The difference between the purchase price and the selling price is the spread. Spreads are fees that market makers provide to individual traders and guarantee the liquidity of foreign exchange transactions. For example, if the bid / ask price is 1.1451 / 1.14506, the spread is 0.5 pips.

Traders are always willing and can establish a market for investors. For the service, he will have a purchase price when buying stocks or a selling price when selling stocks and a quote. The difference between the buy / sell prices offered by traders will fluctuate with the general liquidity of the underlying stock.

The spread of the main currency pairs provided is generally about 1-2 points. Currency spreads with smaller liquidity will be larger. This reflects the liquidity and risks associated with special currency pairs in the professional market. Our trading spread quotes reflect the risks we bear in a trading market and the costs we incur in providing services to customers.

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