The amount of risk the investment industry bears can be determined according to the investment project. It is undeniable that any investment will involve risks and requires corresponding costs. In stock futures and other investment methods, there is a term “holding cost” that is often mentioned. For professionals who have been engaged for many years, they will definitely know the meaning of professional terms, but for others, it will be difficult to understand or understand but they do not know How to calculate.
What does holding cost mean?
First understand the holding cost means the continuous operation and trading of financial products for a period of time. After the transaction is completed, the difference between the cost used in the operation project minus the floating profit and loss amount divided by the current investor holdings can be said to be holding Cost is a measure of reported value. Investor operations are mainly based on the market environment and personal wishes. Individuals decide whether to buy or sell products. If no trading measures are taken, they are holding positions, that is, holding product contracts, and there has been no change. In the investment industry, an increase in open interest means that funds flow into the futures market. Otherwise, it will flow out of the futures market. Trading volume, open interest, and price will develop in direct proportion. As long as one party rises, it will affect other factors.
The transaction cost of foreign exchange is mainly composed of three parts: spreads, handling fees, and overnight interest
Regular brokers generally need to inquire about the quotation from the bank, and not only connect with one bank. In order to ensure their own profits, each bank must make a difference between the buying price and the selling price. The buying price is greater than the selling price. Buying price-selling price = spread. Of course, some market maker (market maker) type brokers can provide quotes themselves, and there will be spreads.
The spread obtained from the bank is called the naked spread. On this basis, the broker can also increase the buying price and lower the selling price to increase the difference between the buying price and the selling price, that is, adding the spread.
Spreads are generally floating. Most of the regular brokers have floating spreads, and a very few are fixed spreads, but I only heard that, and I have not seen it. After all, there are too many platforms, and I only focus on the two that are more effective and the principal is guaranteed. Supervision, other concerns are less. Generally, the naked spread of gold is between 0.3-1.0, which means one lot is about 3-10 US dollars. For European and American currency pairs, it is about 0-4 spreads, which is a lot of 0-5 dollars (0 is a rare case, most of which are 1-5 ), all of which are talking about naked spreads.
2, handling fee
On some platforms, it is impossible to be Lei Feng without making a difference. It must be profitable. On some platforms, the spread has already increased, so there will be no additional fees. Generally, there is no service fee for the platform, the spread after the price increase is between 0.25-0.5.
3, overnight interest
Swap interest is easily overlooked by most novices. Swap interest is also an important holding cost, especially for those who like to do long-term.
In addition, do not forget the hidden costs of foreign exchange transactions!
additional service cost
Some traders have been trading for a while, they want to improve their trading level, they will order some additional services, such as: trading signals, Expert Advisors and other non-free services. In addition, if you go to a trading teacher to give you guidance or a fund manager to help you operate your account, you also need to pay a certain fee, which is an account management fee.
When subscribing to these services, you will find that fund managers who sell fund products rely on selling products to make money, not by helping you manage your account. So you still have to look carefully at your transaction records or the test results of trading signals, if you can, try not to use these things to save costs. After all, monthly fees and service upgrades will continue to increase over time.
In addition, some ordered services may also be deceptive. Before ordering any service, you should read more online reviews and refer to them. Remember, not to fall into a scam is to save you a lot of money. Don’t lose a lot of money because you didn’t investigate it carefully.
Opportunity cost is a non-monetary cost, and it is also an opportunity cost when you fail to seize a favorable transaction opportunity. Traders usually put a lot of money in the trading account. Failure to seize the trading opportunity means loss of profit. Not to mention, you have to spend time to watch the market trend and the market. Good trading opportunities are wasted. .
Although the opportunity cost will not affect the amount of your account, it will affect your trading psychology, which will affect your long-term performance. If you do not have enough confidence in your trading strategy and always hesitate, it is easy to miss the best trading opportunity, affect your profitability, and further suppress your confidence.
Obviously, if a trader fails several consecutive orders, he will be conservative and easily miss the trading opportunity. This behavior is a kind of proximate effect and will be detrimental to traders. Soon, they will realize that they have missed a lot of trading opportunities, and then they will over-trade in order to make up for their mistakes.
How to calculate the foreign exchange holding cost?
The result of position cost calculation affects investors’ trading operations of investment products, and can make appropriate decisions on position opening and distribution, and improve the safety of investment.
The formula for calculating the cost of foreign exchange holdings: the sum of the funds bought during the holding period and the sum of the funds sold during the holding period is subtracted, the difference calculated between the two is divided by the number of shares held by the investor, and this calculation formula Calculate the accurate value and make a judgment for the future operation direction. You will definitely see a variety of calculation formulas in the search process, but this formula is basically used in the industry. It has scientific basis and the calculation structure is practical. .
Therefore, if you want to obtain higher benefits in the investment industry, you need to have an in-depth understanding and analysis of holding costs. For those who are not professionals in finance, who have not systematically learned the relevant knowledge about investment, they will make decisions based on personal experience during the operation process, with high accuracy and high risk. In the process of learning, the knowledge points of holding cost will be learned. After learning the theoretical knowledge, the focus is to apply it flexibly to the actual investment process, so that the theoretical knowledge can achieve corresponding results in practice.
People who don’t know the cost of holding positions can make notes to better understand the professional knowledge, so that it can be used flexibly in future work and investment and ensure that reasonable decisions are made.