Features of actual foreign exchange trading
Foreign exchange has become a new type of asset form in the global investment field. According to the Bank for International Settlements statistics, the global daily foreign exchange transaction volume is about 1.9 trillion US dollars. When you expect a specific freely convertible foreign exchange (or foreign currency) in the future, the exchange rate relative to the freely convertible foreign exchange (or foreign currency) you currently hold will rise, you can save yourself The freely convertible foreign exchange (or foreign currency) is converted into the freely convertible foreign exchange (or foreign currency) that you expect to appreciate, in this way, the profit of the exchange rate difference can be obtained.
Through domestic, commercial banks, customers can exchange their own freely convertible foreign exchange (or foreign currency) into another freely convertible foreign exchange (or foreign currency) transaction, which is called "foreign exchange real transaction." The so-called "firm offer" means that in this type of transaction, customers cannot use financing methods similar to those in futures transactions, that is, financing from the bank after paying the margin to magnify the transaction amount by several times.
The currencies available for actual foreign exchange transactions by domestic commercial banks include the US dollar, the euro, the British pound, the Japanese yen, the Swiss franc, the Canadian dollar, the Australian dollar, and the Hong Kong dollar. These currencies are freely convertible. Actual foreign exchange transactions do not provide transactions involving foreign currencies (or foreign currencies) that are not freely convertible. Which currency is convertible and which is not convertible? Would you please consult the bank where you want to open an account?
When conducting actual foreign exchange transactions, if you exchange USD with another freely convertible foreign exchange (or foreign currency), this kind of transaction is customarily called "direct trading"; if you exchange other than USD, The two freely convertible foreign exchanges (or foreign currencies), this kind of transaction is customarily referred to as "fork trading."
When expressing a specific exchange rate, the base currency is in front, and the target currency is in the back, separated by "/" in the middle, indicating how much target currency can be exchanged for a unit of the base currency. There are two ways of quotation involving the exchange rate of the US dollar. The quotation method that uses the US dollar as the base currency is called "direct quotation," such as USD/JPY. The US dollar as the target currency is called "indirect quote," such as EUR/USD.
Foreign exchange actual trading uses the T+0 clearing method. After the customer completes a transaction, the bank's computer system immediately completes the fund delivery automatically. In other words, if the market is turbulent, investors can seize multiple profit opportunities in one day.
The cost of actual foreign exchange transactions
The transaction cost of actual foreign exchange transactions is reflected in the bid-ask spread. The bank quotes the buying price and the selling price by international foreign exchange market conditions and international practices. Banks have set different trading spreads for different currency exchange rates. Taking EUR/USD as an example, the trading spreads are generally 30 points. The buying price given by the bank is 1.2830, and the selling price provided is 1.2860. If the customer wants to buy euros with US dollars, he needs to accept the price of 1.2860, and if he wants to buy US dollars with the euros he holds, he needs to get 1.2830. s price. Those new to actual foreign exchange transactions cannot quickly tell which is the bank's buying price and the bank's selling price. The trick is that the bank always buys low and sells high. It will not lose money and make money.
In addition, by international market practice, banks offer specific point discounts for large-value transactions, that is, by narrowing the spread between the bank’s buying price and selling price, reducing transaction costs for customers who conduct large-value transactions. Would you please consult the bank where you want to open an account for the specific conditions for implementing significant discounts?
Under China's current foreign exchange management system, foreign currencies are divided into cash exchange and cash. Cash transfer mainly refers to bank deposits obtained and formed by international settlement methods such as checks, remittances, and collections. Cash usually refers to banknotes and coins in foreign currencies or deposits generated by depositing banknotes and coins into banks. Foreign currency cash can only be transported abroad to pay, and the bank that transports cash needs to bear the freight, insurance premiums, interest, and other costs. Hence, banks generally have to make a specific difference in the price of personal foreign exchange transactions. To attract customers, some commercial banks no longer differentiate the costs of cash. However, according to the relevant regulations of the state's foreign exchange management, money still cannot be arbitrarily converted into money in genuine foreign exchange transactions, and the business of actual foreign exchange transactions is still based on the principle of "change of foreign exchange" and "change of banknotes."
Ways of actual foreign exchange transactions
At present, domestic, commercial banks provide a variety of trading methods for actual foreign exchange transactions. Customers can conduct genuine foreign exchange transactions through bank counters, personal wealth management terminals, bank business halls, telephones, and the Internet. Please refer to the help file provided by your bank for detailed descriptions of various transaction methods.
Suppose customers choose counter transactions or use personal wealth management terminals for commerce. In that case, the transaction time is limited to the bank’s average working days, mainly from Monday to Friday from 9:00 to 17:00, public holidays, statutory holidays, and international markets are closed Unable to trade. And if the customer chooses telephone or Internet transactions, generally speaking, the transaction time will extend from 8:00 on Monday to 5:00 on Saturday. Trading on public holidays, statutory holidays, and the international market are closed. It can be seen that in addition to having to go to the scene to experience the atmosphere, trading via telephone or the Internet is a better choice.
Instructions for actual foreign exchange transactions
The current foreign exchange accurate trading instructions are generally divided into market price trading and entrusted trading. Market price transactions are executed immediately according to the bank’s current quotation; assigned transactions, commonly known as pending transactions, means that investors can first send transaction instructions to the bank, and when the bank’s quote reaches the exchange rate that the investor hopes to trade, the bank’s computer system immediately According to the investor’s entrusted order. The convenience brought to customers by entrusted trading instructions is that customers do not need to keep an eye on changes in the foreign exchange market all the time, saving a lot of time. However, customers also need to be cautious when using entrusted trading instructions, especially when the entrusted trading instructions for opening positions do not follow the entrusted trading instructions for stop loss. The foreign exchange market is changing rapidly, and rashly using commissioned trading instructions may bring you significant risks.
The so-called "Stop Loss" is a commissioned transaction order for automatic liquidation. When the market exchange rate changes in a direction that is not conducive to your established position, you can automatically close the work through this commissioned transaction instruction. For example, if you bought the pound at 1.9000, you feel that you cannot bear the loss caused by the pound falling below 1.8900. You can place the stop-loss order at 1.8900. Under normal market conditions, when the exchange rate drops to this price, the banking system will automatically close your long position in GBP.
Risks of actual foreign exchange transactions
Foreign exchange rates are affected by many factors and are unpredictable. Customers who conduct actual foreign exchange transactions may make profits or suffer losses, depending on whether the customer's judgment on the market conditions is accurate. This is the so-called "market risk."
When specific emergencies occur, the exchange rate may fluctuate rapidly in a short period. The bank may not guarantee that it will complete the transaction by the market order and entrusted order issued to the bank or at the price you specify. Unable to ensure the transaction or the inability to ensure that the transaction at the price you specify may bring you profits, but it will bring you losses in most cases. This is the so-called "transaction risk." Generally speaking, only actual foreign exchange transactions via the Internet can provide you with the ability to respond to rapid market conditions in terms of hardware conditions.
Similarly, when the exchange rate of the international market fluctuates sharply, the bid-ask spread will increase. The bank you opened an account with will also adjust the bid-ask feed it provides to customers to prevent the risks it faces. At this time, your transaction costs will be higher than usual—a lot of.
The threshold for actual foreign exchange transactions
All domestic residents with valid identity documents and total capacity for civil conduct, with a certain amount of freely convertible foreign exchange (or foreign currency), can open an account at a domestic, commercial bank counter to conduct actual foreign exchange transactions. Customers who choose telephone transactions or Internet transactions may need to go through some procedures or download software. Please consult the bank where you want to open an account for details.
The minimum transaction amount for each foreign exchange transaction is generally 100 US dollars or equivalent foreign currency, and there is no maximum limit. Some commercial banks may give a lower minimum transaction amount to attract customers.
Before you start an actual foreign exchange transaction, the most you should know is yourself. What is the purpose of your actual foreign exchange transaction, your risk-bearing ability and risk appetite, and your grasp of the foreign exchange market?
One fact you should know is that, like investors in other markets, most investors in the foreign exchange market lose money in the long run. Only those investors who have a solid risk-bearing ability, a deep understanding of the foreign exchange market, and the necessary hardware conditions are more likely to make profits in the long run.
I hope that actual foreign exchange trading will not seriously affect your quality of life. I wish you success!