Overview of Forex Trading

Foreign exchange transactions, commonly known as foreign exchange transactions, refer to the exchange behavior between different currencies at a specific exchange rate and a specific delivery date by the subject of foreign exchange transactions in order to meet the needs of certain economic activities or other activities, that is, in the domestic currency Exchange into foreign currency, or exchange foreign currency into national currency, or exchange between foreign currencies.
The elements of foreign exchange transactions include transaction date, counterparty, currency, exchange rate, amount, delivery date, payment instruction, etc. Currency receipts and payments generated by foreign exchange transactions generally do not actually take place in the transfer of assets, but are settled by bank transfers through accounts. Therefore, foreign exchange trading, foreign exchange trading, and foreign exchange trading all talk about the same concept. It should be noted that this kind of currency trading generally only targets freely circulated currencies in the world, not all currencies.

Classification of foreign exchange transactions

From the perspective of the nature of the transaction and the type of realization, foreign exchange transactions can be divided into the following two categories. Foreign exchange derivatives trading.
(1) Basic foreign exchange transactions to meet the real needs of customers for trade and capital transactions;
(2) On top of basic foreign exchange transactions, foreign exchange transactions, foreign exchange selective transactions, swap transactions, and swap transactions that are conducted to avoid and prevent exchange rate risks or for foreign exchange investment or speculative needs.

The basic foreign exchange transactions belonging to the first category are mainly spot foreign exchange transactions, while foreign exchange derivatives transactions include forward foreign exchange transactions for a reason. Approximately 5% of the daily transaction turnover is due to companies and government departments buying or selling their products and services abroad, or having to convert the profits they earn abroad into the national currency; and the other transactions are for earning Profit or speculation.
For speculators, the best trading opportunity is always to trade the most commonly traded (the most liquid) currency as the “primary currency”.
Today, 85% of daily transactions are in these major currencies, which include the U.S. dollar, Japanese yen, Euro, British currency, Swiss franc, Canadian dollar and Australian dollar. .
It can be seen from Table 2.1 that the international foreign exchange market is an instant 24-hour trading market, and foreign exchange transactions start from Wellington every day. Volatility is more likely to occur. Selling begins, and as the earth rotates, the business day of every financial center in the world will start in turn, first in Tokyo, then London and New York. Compared with other financial markets, the foreign exchange market is more sensitive to economic, social and political events that occur at any time, and is more prone to fluctuations.

The foreign exchange trading market is mainly over-the-counter or internal bank trading market, because in fact foreign exchange transactions are reached by both parties through the telephone or an electronic trading network. Foreign exchange transactions are not concentrated on a certain exchange like stock and futures transactions. .