Lesson 2: Characteristics of the foreign exchange market

In recent years, the foreign exchange market has been favored by more and more people. It has become the new darling of international investors is closely related to the characteristics of the foreign exchange market itself. The main features of the foreign exchange market are:

There is no market

The financial industry in western industrial countries has two systems, namely, a central operation for centralized trading and a business network without a unified fixed location. Stock trading is bought and sold through an exchange. Like the New York Stock Exchange, the London Stock Exchange, and the Tokyo Stock Exchange, the main trading venues for stocks in the United States, the United Kingdom, and Japan, the quotations, trading hours, and settlement procedures of centralized financial products have unified regulations. And established the industry association, formulated the industry code. Investors use brokerage companies to buy and sell essential commodities. This is "there is a market, and there is a market." Foreign exchange trading is carried out through a network of merchants with a unified operating market, unlike stock trading with a centralized and suitable location. However, the network of foreign exchange transactions is global, and an unorganized organization is formed. The market is connected by an agreed method and advanced information system. Traders do not have membership in any organization, but they must obtain the same trust and recognition of the industry. Without a suitable venue, this kind of foreign exchange trading market is called "there is no market." The global foreign exchange market averages trillions of dollars in transactions every day. Such a massive amount of funds is cleared and transferred in this kind of neither centralized place nor the control of the central clearing system and without the supervision of the government.

Cycle operation

Due to the different geographic locations of financial centers worldwide, the Asian, European, and American markets have become a global foreign exchange market that operates continuously 24 hours a day due to time differences. The New York market opens at 8:30 in the morning (based on New York time), the Chicago market opens at 9:30, San Francisco begins at 10:30, Sydney opens at 18:30, Tokyo opens at 19:30, and Hong Kong starts at 20:30. Singapore opened, Frankfurt opened at 2:30 in the morning, and the London market opened at 3:30. With such a 24-hour operation, the foreign exchange market has become a day and night market. The foreign exchange market will be closed only on Saturdays, Sundays, and significant holidays in various countries. This continuous operation provides investors with an ideal investment place without time and space barriers. Investors can find the best time to trade. For example, suppose an investor buys yen in the New York market in the morning. In that case, the yen rises after the Hong Kong market opens in the evening, and the investor sells in the Hong Kong market; he can participate in any market, at any time, regardless of where he is. Buying and selling. Therefore, the foreign exchange market can be said to be a market without time and space barriers.

Zero-sum game

In the stock market, if a particular stock or the entire stock market rises or falls, the value of a specific store or stock as the whole market also rises or falls. For example, the stock price of Nippon Steel in Japan falls from 800 yen to 400 Japanese Yen, so that the value of all Nippon Steel’s shares has also been reduced by half. However, in the foreign exchange market, the change in the amount of value represented by the exchange rate fluctuation is entirely different from the change in the value of the stock. This is because the exchange rate refers to the exchange ratio of the two currencies, and the change in the exchange rate also decreases the value of a coin—an increase in the value of another currency. For example, 22 years ago, 1 U.S. dollar was exchanged for 360 yen. At present, 1 U.S. dollar was exchanged for 120 temporary yuan. This shows that the value of the Japanese yen has risen while the value of the U.S. dollar has fallen. The total value changes from time to time and does not increase value; It will not reduce the weight. Therefore, some people describe foreign exchange trading as a "zero-sum game," or more precisely, the transfer of wealth. More and more funds have been invested in the foreign exchange market in recent years, and the volatility of exchange rates has increased. The scale and speed of wealth transfer have become more prominent and faster. Calculated by the daily trading volume of 1.5 trillion US dollars in global foreign exchange, A rise or fall of 1% means that 150 billion of funds have to be replaced by new owners. Despite the significant changes in foreign exchange rates, any currency will not become waste paper. Even if money continues to fall, it will always represent a specific value unless the abolition of that currency is announced.