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Basic knowleage of forex

What is forex?

Forex, that is, foreign currency or expressed in foreign currencies can be used for international settlement of payment. The foreign exchange market, is the world's largest financial market. Foreign exchange trading volume in 6 trillion a day for the world of tens of thousands of traders and bank profits. Unlike other financial markets, foreign exchange is not in the exchanges, otc foreign exchange.

In our country in 1996 promulgated the "regulations on the administration of foreign exchange" in article 3 of the specific content of foreign exchange to make the following provisions: foreign exchange refers to: (1) the foreign currency. Including notes and COINS. (2) the foreign currency payment vouchers. Including bills, bank payment vouchers, postal savings certificates, etc. (3) the foreign currency securities. Including government bonds, corporate bonds, stocks, etc. (4) Special Drawing Rights and European currency units. (5) other foreign currency assets.

Background

Foreign exchange trading is traded in calculation of various kinds of currency relative prices and a monetary mechanism. Individual or institutional traders in the buy and sell a currency to another currency. Currency trading is usually in the form of currency pairs, namely to sell one currency for another currency, and marked by the following way: EUR/USD or CHF/YEN. Exchange rate is decided by force, affect the market supply and demand.

Speculative traders through the forecast than another currency value of a currency movements, profit or loss. Traders on currency, selling bearish on the currency. In short, the value of a currency is a reflection of a country's economic conditions than other countries. The foreign exchange market does not depend on a particular economy. Regardless of the country's economy on the rise or decline situation, traders can be cut in the currency market by buying or selling currencies. Reactive trading refers to because of economic or political events for money buying and selling, and speculative trading depends on traders expect in the future.

Foreign exchange trading?

Money is the core of the foreign exchange market. As in gold, silver, grains and other commodities trading, currency price reflects its value. And other free flow of market, foreign exchange market price is determined by supply and demand. Foreign exchange trading is a form of investment by traders on the future of the currency exchange rate trend projections for investment.

Purpose

In the past, is engaged in the foreign exchange trading is mainly for international investment Banks and commercial Banks, fund managers have a variety of investment products, money brokers, large companies, and a few individual traders. This trend has now changed. With the development of network technology, with the advantage of unique leveraged foreign exchange industry, more and more individual traders in line with the purpose of speculation to join in. In addition, to join the cause of the currency for other purposes, including to improve the efficiency of business transactions (multinational companies convert their profits, or to hedge the risk of future price depreciation), and speculative profit, it has become the size of foreign exchange participants to join in the most common form of motivation.

The causes of the foreign exchange market

The foreign exchange market, is refers to is engaged in the foreign exchange trading places, or various currency exchange between each other. The foreign exchange market exists, because:

Trade and investment

When imported goods, import and export business, a currency and charges on export goods of another currency. This means that, when they are on the settlement of accounts, cash different currencies. Therefore, they need to receive part of the currencies into currency can be used to buy something. Similarly, a company to buy foreign assets must pay in currency concerned, therefore, it will need its own currency is converted back to the parties.

Speculative

The exchange rate between two currencies will be as the change of supply and demand between the two currencies. Traders on a currency to buy a currency, and in another thrown more favourable exchange rate on the currency, he can make a profit. Speculation about most of the foreign exchange market transactions.

Hedge

Due to the exchange rate between two relevant currency fluctuations, those with foreign assets, such as factory company will these monetary assets discount cost countries, it may suffer from some risk. When in foreign currency value of foreign assets over a period of time at constant value, if the exchange rate change, in the domestic currency conversion when the value of the asset, can produce profit and loss. The profits and losses of the company can be eliminated by hedge this potential. This is on a foreign exchange trading, the trading results just offset by exchange rate changes and the profits and losses of the foreign currency assets.

Major global foreign exchange market

Refers to the foreign exchange market by Banks and other financial institutions, proprietary traders, large multinational companies, through intermediaries or telecommunications system coupling, in various currencies as the object of buying and selling in the market.

At present, there are about more than 30 major foreign exchange markets in the world, they are found in all continents around the world in different countries and regions. According to the traditional regional division, can be divided into three most of Asia, Europe, North America, etc, among them, the most important is Europe's London, Frankfurt, Zurich and Paris, America's New York and Los Angeles, Australian Sydney, Tokyo, Singapore and Hong Kong and other Asia.

The foreign exchange market characteristics

Unparalleled liquidity

Foreign exchange market trading more than $6 trillion a day, is the most liquid market in the world - its daily trading volume a month equivalent of Wall Street. The foreign exchange market works day and night attracted to buy or sell currency traders all over the world.

Eight kinds of major currencies

Despite hundreds of securities of the securities market, but the foreign exchange market trading only in several currencies: the usd, the eur, the jbp, gbp, the cad, or under the condition of relatively loose, also Can trade the aussie and nz. In the currency to trade the main reason is that these currencies which enjoys a good reputation of the central bank, the stable political situation, and the relatively low rate of inflation. Currency in the form of currency pairs to trade (e.g., USD/JPY or Dollar/Yen), and the real-time floating exchange rate.

24-hour trading

Different from the securities market, due to the different geographical position, the world's financial centre in Asia, Europe and America market because of the relationship between the time difference, forming a 24-hour continuous operation of the global foreign exchange market, there is no legal open closed time. In currency markets as countries the political situation, the central bank's main news release, and governments to report changes in factors such as economic data. When some parts of traders reduce foreign exchange activities, due to late into the other areas traders is due to enter the day began to frequent trading. So run 24 hours a day, the foreign exchange market to become a day and night market, only major holiday, Saturday, Sunday and national foreign exchange market will shut down.

As a closed at 5 PM eastern time daily time, then it is not closed in the true sense. Currency only closed on Friday at 4 p.m. eastern time, weekend rate, and 5 p.m. eastern time on Sunday to open. Start trading currency from Sydney, Australia, and according to the time difference, in the main financial centre, Tokyo, London, New York opened one after another.

A city without a

Financial sector there are basically two systems of western industrial countries, focus on business operation and no unified fixed places the hong merchants in the middle of the network. Buy and sell stocks is through exchange-traded. Like the New York stock exchange, the London stock exchange, the Tokyo stock exchange, are the United States, Britain, Japan's main stock trading places, focus on buying and selling of financial commodity, its price, trading and settlement procedures have unified regulation, and set up a trade association, and made the trade rules. Investors through brokers buy and sell the goods, this is there's a "city". Foreign exchange trading is through the network of the hong merchants that no unified market operation, it is not like the location of the centralized and unified stock trades. However, foreign exchange trading is a global network, and formed no organization of organization, the market is by the way of all the contact and the advanced information system, traders do not have any membership in the organization, but must obtain trust and recognition of the industry. The foreign exchange market of have no unified field is referred to as "a city without a". Global daily average of billions of dollars in foreign exchange market transactions. In which such large sums, neither centralized place nor central clearing system control, and the lack of government under the supervision of the liquidation and metastasis.

A zero-sum game

In the stock market, a stock or the entire stock market up or down, so, the value of a stock or the stock value of the whole stock market will rise or fall, such as Nippon steel's share price dropped from 800 yen to 400 yen, so all Nippon steel, the value of stocks has been cut in half. However, in the foreign exchange market, exchange rate fluctuations represents the change in the value and stock value change is completely different, this is due to exchange rate refers to the currency exchange rate between the two countries, the change of exchange rate is the value of a currency also reduce and another currency value increase. In 22 years ago, for example, one dollar, 360 yen, at present, 120 yen for 1 dollar, this suggests that the yen rise, while the value of the dollar decline, from the total value, changing, don't add value, also do not reduce the value. As a result, some describe forex trading is a "zero-sum game", more specifically, the transfer of wealth.

Clinch a deal the quality and speed

Traders offer clinch a deal the price stability and instant, investors can use instant market price clinch a deal, even in the busiest when market conditions, cannot clinch a deal. In futures market, clinch a deal the price not sure because all the order through a centralized exchange to set, thus limits the number of transactions in the same price, the flow of capital to the total transaction amount. And foreign exchange dealers every quotation is performed, that is to say as long as investors are willing to can clinch a deal! There will not be negotiable but not clinch a deal!

Foreign exchange trading commission

Traded in the futures market, in addition to price, investors must also burden of additional fees or charges. All financial products have purchase price and sale price, and the difference between the buying and selling price is defined as spreads, or clinch a deal cost.

Without the middleman

Spot foreign exchange transactions, different from stock trading, not costly middlemen. Foreign exchange trading, customers can be directly traded in foreign exchange market, just easily click mouse, can complete currency trading, eliminating the cumbersome steps middleman, convenient save worry made foreign exchange.

Risk warning:All foreign exchange, precious metals are accompanied with great risk, therefore is not suitable for all investors. Please be sure to fully understand the risks at your own can bear within the scope of the investment. More risk for details, please refer to the risk of WSG statement and deposit policy.