Contract spot foreign exchange trading, also known as foreign exchange margin trading, deposit trading, virtual trading, refers to investors and financial companies (banks, dealers, or brokers) that specialize in foreign exchange trading, signing contracts for entrusted trading of foreign exchange, and paying A specific ratio (generally no more than 10%) of trading margin can be used to buy and sell foreign exchange of 100,000, hundreds of thousands or even millions of dollars at specific financing multiple. Therefore, this type of contract trading is only a written or verbal commitment to a particular price of a specific foreign exchange and then waits for the cost to rise or fall, settle the transaction, obtain profit from the changed spread, and of course, also bear it. The risk of loss is reduced. Because this kind of investment requires more or less capital, it has attracted the participation of many investors in recent years.

Foreign exchange investment appears in contracts, and the main advantage is to save the amount of investment. When buying and selling foreign exchange in the form of a contract, the investment amount is generally not higher than 5% of the contract amount. The profit or loss paid is calculated based on the amount of the entire contract. The amount of foreign exchange contracts is determined according to the type of foreign currency. Specifically, the amount of each contract is 12,500,000 yen, 62,500 pounds, 125,000 euros, and 125,000 Swiss francs, and the value of each contract is about 100,000 US dollars. The amount of each contract in each currency cannot be changed according to the requirements of investors. Investors can buy and sell several or dozens of contracts according to their deposit or margin. Under normal circumstances, investors can buy and sell a contract with a margin of US$1,000. When the foreign currency rises or falls, the investor's profit and loss are calculated based on the contract amount, which is US$100,000. Some people think that the risk of buying and selling foreign exchange in the form of a contract is more significant than buying and selling, but it is not difficult to see the difference when we carefully compare the two. Please see the table below for details.

Hypothesis: buy Japanese yen when 1 U.S. dollar is exchanged for 135.00 Japanese yen

Real-buy and real-sale margin form

Buying 12,500,000 yen requires US$92,592.59 US$1,000.00

If the yen exchange rate rises by 100 points

Profit US$680.00 US$680.00

Profit rate 680/92,592.59=7.34% 0 680/1000=68%

If the yen exchange rate drops by 100 points

Loss US$680.00 US$680.00

Loss rate 680/92,592.59=7.34% 0 680/1000=68%

It can be found from the above table that the amount of profit and loss for real-buying and real-selling and margin trading is the same. The difference is the difference in the number of funds invested by investors, and the requirements for real-buying and real-selling are Investing more than 90,000 U.S. dollars to buy and sell 12,500,000 yen. Still, only 1,000 U.S. dollars in the form of margin, the difference in the investment between the two is more than 90 times. Therefore, taking a contract is more suitable for investors with a small investment and large output, which is more suitable for public investment and can win more profits with smaller funds.

However, special attention should be paid to the trading of foreign exchange in the form of margin. Although the margin is small, the actual amount of funds is enormous, and the daily fluctuation of foreign exchange rates is considerable. If investors judge the trend of foreign exchange, Mistakes can easily cause the entire security deposit to be wiped out. Take the above table as an example. The same is the loss of 100 points, and the investor’s 1,000 USD will lose 680 USD. If the yen continues to depreciate and the investor does not take timely measures, it will cause the margin to be lost and may require additional investment. Therefore, high-yield and high risk are equivalent, but risks can be managed and controlled if investors use proper methods.

In contract spot foreign exchange transactions, investors may also receive considerable interest income. The interest calculation method of contract spot foreign exchange is not based on investors' actual investment amount but the contract's amount. For example, suppose an investor invests US$10,000 as a margin and buys a total of 5 arrangements of British pounds. In that case, interest calculation is not calculated based on the investor's US$10,000 invested. Still, based on the total value of 5 contracts of British pounds, that is Multiply the contract value of the British pound by the number of contracts (£62,500*5), so that the interest income is considerable. Of course, if the exchange rate does not rise but falls, investors will not be able to offset the loss of price changes even though investors have taken an interest.

The combination of financial and interest does not mean that there is interest in buying and selling any foreign currency. Only when purchasing high-interest foreign currencies can there be interest income. Selling high-interest foreign currencies not only has no interest income, but investors must also pay interest. Since interest rates in various countries are frequently adjusted, the payment or collection of interest in different currencies in different periods is separate. Investors should base on the interest collection standards announced by dealers engaged in foreign currency transactions.

There are two calculation formulas for interest. One is the foreign currency used for direct pricing, such as Japanese yen and Swiss francs, and the other is the foreign currency used for indirect pricing, such as Euros, British pounds, and Australian dollars.

The interest calculation formula for Japanese Yen and Swiss Franc is:

Contract amount1/market price interest rate number of days/360number of contracts

The interest calculation formula for Euro and British Pound is:

Contract amount * market price * interest rate * number of days / 360 * number of contracts

The contract spot foreign exchange trading method can either buy at a low price and sell it after the price rises or sell it at a high price and buy after the price drops. The cost of foreign exchange always rises or falls in waves. This method of buying first and selling first can make money in the rising market and make money in the falling situation. If investors can use this method flexibly, whether the demand is rising or falling, it can be left and right. So, how do investors calculate the profit and loss of contract spot foreign exchange trading? There are three main factors to consider.

First, we must consider changes in foreign exchange rates. Investors making money from exchange rate fluctuations can be the main way forprimaryestors to obtain profits from contract spot foreign exchange investments. Points calculate the profit or loss. The so-called points are the exchange rate. For example, if 1 U.S. dollar is exchanged for 130.25 yen, 130.25 yen can be 13025 points. When the yen drops to 131.25, it will fall by 100 points. At this price point, each point represents US$6.8. The value represented by each end of each currency, such as the Japanese Yen, the British Pound, and the Swiss Franc, is also different. In contract spot foreign exchange trading, the more points you earn, the more profits you make, and the fewer points you lose, the less you lose. For example, an investor buys one contract of British pound at the price of 1.6000, and when the pound rises to 1.7000, the investor sells this contract, that is, earns 1,000-pound pounds, and the profit is as high as $6,250. Another investor bought the pound at 1.7000, and when the pound fell to 1.6900, he immediately discarded the contract in his hand. Then, he only lost 100 points; that is, he lost $625. Of course, the number of points earned and lost is directly proportional to profit and loss.

Secondly, we must consider the interest expenditure and income. This article has stated that buying high-interest foreign currency first will get a certain amount of interest, but rather, selling high-interest foreign currency will pay a particular appeal. Suppose it is a short-term investment, such as the end of the day's trading or the end of one or two days. In that case, there is no need to consider interest expenses and gains because interest expenses and payments in one or two days are minimal and have little impact on profit or loss. For medium and long-term investors, the interest issue is an integral part of life that cannot be ignored. For example, the investor first sells the pound at the price of 1.7000, and one month later, the pound is still at this position. If you pay 8% interest for selling the pound, the monthly interest payment is as high as $750. This is also a lot of expenditure. Judging from the current investment situation of ordinary residents, many investors see more interest income while ignoring the trend of foreign currencies, so they all like to buy high-interest foreign currencies. As a result, they lose more with less. For example, when When the pound fell, investors purchased the pound. Even if a contract collects interest of $450 per month, the pound fell by 500 points a month and lost $3,125 in moments. The interest income cannot make up for the loss caused by the decline in the pound. Therefore, investors should put the trend of foreign exchange rates first and put interest income or expenditure in the second place.

Finally, we must consider the expense of handling fees. Investors buy and sell foreign exchange contracts through financial companies. Therefore, investors must calculate this part of the expenditure into the cost. The commission charged by financial companies is based on the number of investors' purchase and sale contracts, not profit or loss. Therefore, this is a fixed amount.

The above three aspects constitute the calculation method for calculating the profit and loss of contract spot foreign exchange.

The profit and loss calculation formula for the Japanese Yen and Swiss Franc is:

Contract amount*(1/sell price-1/buy price)*number of contracts-handling fees +/- interest

The profit and loss calculation formula for Euro and British Pound is:

Contract amount * (selling price-buying price) * number of contracts-handling fee +/- interest

As an investment tool, foreign exchange margin trading is legal in Europe, America, Japan, Hong Kong, Taiwan, and other countries and regions, and dealers and trading activities are subject to government supervision.