Economic Wisdom to Apply in Your Twenties

Chapter 42

Chapter 5, Section 6 Buying and selling foreign exchange, be a dancer on the tip of a knife

Currency is an asset, investment is a fashion.

In the spacious bank's foreign exchange trading hall, the small screen was looking up at the constantly flashing foreign exchange quotes on the large quotation screen when suddenly it was tapped on the shoulder. "Xiaoping, long time no see!" Looking back, Xiaoru was standing behind him with a smile all over her face. "Yeah! I haven't seen you lately. What are you up to?" "No, I went on a trip to Southeast Asia on 'Eleventh', and when I came back last Friday, I caught up with the non-agricultural employment data released by the United States, which was lower than expected. , causing non-US currencies to rise across the board.”

Xiaoru sat down while talking: "I bought the euro at 1.2330, which was not bad, but it ran away at 1.2400. No, the euro fell again on Tuesday, so I came to chat with you."

"Oh!" Xiaoping said while holding his glasses on the bridge of his nose, "The fall of the euro on Tuesday was mainly due to the profit-making highs in the previous period and the bad data in the euro zone. But now it is just close to the lower edge of the previous upward channel at 1.2300. There should be some support in the short term.”

While talking, Xiaoru suddenly remembered that she still had something to do, she said: "It's almost time, I should go back." Xiaoping then remembered that she also had serious business to do.When the people around heard their conversation, they all smiled, because everyone had a similar experience, and they forgot about business because they talked about foreign exchange.It seems that foreign exchange trading has really become fashionable!
For foreign exchange, many people feel that it is relatively unfamiliar, thinking that it is something that people who want to go abroad need to know.In fact, this is a complete misunderstanding.As an investment tool, foreign exchange is changing our lives.

Foreign exchange is the abbreviation of international exchange.It usually refers to various means of payment expressed in foreign currencies that can be used for the settlement of international claims and debts.Foreign exchange in a narrow sense refers to various means of payment expressed in foreign currencies, which are generally accepted by all countries and can be used for international settlement of claims and debts.It must have three characteristics: payability (the asset must be denominated in foreign currency), availability (it must be a claim that can be compensated abroad), and convertibility (it must be a foreign currency that can be freely converted into other means of payment) assets).

In fact, understanding foreign exchange is very simple.There is a difference when anything is compared.For commodities, if there is a difference, there will be a price difference, and if there is a price difference, there will be room for profit.The same is true for currencies, and foreign exchange investment is to obtain the difference between different currencies.In recent years, with the further development of the economy, investing in foreign exchange has become an effective way to create billionaires.

The external environment of the foreign exchange market is relatively fair and transparent, and the transaction volume is large. The international market trades more than 10000 trillion US dollars a day, and no one can control it. Even government intervention can only play a short-term role, and the long-term or medium-term trend cannot be controlled. Yes, this is unmatched by the stock market.Furthermore, behind a stock is a company, and behind a currency is a country. It is self-evident which of the two backgrounds is stronger.In addition, any kind of currency does not fluctuate as much as stocks in a year. Even if it is a spot lock, it will lose up to 10% a year, which will not fall as badly as stocks.

In foreign exchange transactions, there are generally several trading methods: spot foreign exchange transactions, forward foreign exchange transactions, foreign exchange futures transactions, and foreign exchange option transactions.

1. Spot foreign exchange transaction
Also known as spot transaction or spot transaction, it refers to a transaction behavior in which both parties to the transaction go through the delivery procedures on the same day or within two trading days after the foreign exchange transaction is completed.Spot foreign exchange trading is the most commonly used trading method in the foreign exchange market, accounting for most of the total foreign exchange transactions.The main reason is that spot foreign exchange trading can not only meet the buyer's temporary payment needs, but also help buyers and sellers adjust the currency ratio of foreign exchange positions to avoid foreign exchange rate risks.

2. Forward foreign exchange transaction
The difference between forward and spot foreign exchange transactions is that after the transaction is completed, the main body of the market transaction, in accordance with the provisions of the forward contract, will trade foreign exchange transactions on a specified date in the future (generally after 3 business days after the transaction date).Forward foreign exchange trading is an essential component of an efficient foreign exchange market. In the early 20s, the international exchange rate system changed from a fixed exchange rate to a floating exchange rate, exchange rate fluctuations intensified, and the financial market flourished, thus promoting the development of the forward foreign exchange market.

3. Foreign exchange futures trading
With the development of the futures trading market, currency (foreign exchange), which used to be the medium of commodity trading, has also become the object of futures trading.Foreign exchange futures trading refers to the transaction in which foreign exchange buyers and sellers buy or sell a certain standard amount of a specific currency at a price determined by a public call price (similar to an auction) in an organized exchange at a future time (a certain day in the future). Activity.

4. Forex options trading
Foreign exchange options are often regarded as an effective hedging tool because it can eliminate the risk of depreciation while retaining the potential for profit.Foreign exchange option means that one party to the transaction (the holder of the option) has the right to make a contract, and can decide whether to execute (deliver) the contract.If desired, the buyer (holder) of the contract can allow the option to expire without delivery.

In my country, personal foreign exchange trading is the most used business, which is to entrust a bank with foreign exchange management rights to buy and sell one foreign currency into another foreign currency with reference to the current exchange rate in the international financial market, and take advantage of the fluctuation of the exchange rate to buy low and sell high. Profit from it.

Personal foreign exchange trading business has many advantages for investors who want to increase the value of foreign exchange in their hands. Not only can they buy and sell foreign currencies with lower interest rates in their hands into another foreign currency with higher interest rates to increase deposit interest income, but also can Take advantage of frequent changes in foreign exchange rates to win a huge exchange rate difference.However, as an investor, you should be soberly aware that foreign exchange investment is often accompanied by certain exchange rate and interest rate risks, so you must pay attention to investment strategies. necessary loss.

Wisdom Trivia: Key Advantages of Forex Margin Trading

1. The foreign exchange market is a global market and is not controlled by individuals, funds, or even the central bank.

2.24. [-]-hour trading, investors can choose to enter the market at any time.

3. Mainly focus on the 5 major currency transactions, eliminating the time and trouble of selecting trading varieties.

4. Take profit and stop loss orders can be set to help control risks.

5. The daily fluctuation range, taking the British pound as an example, the average daily fluctuation is 150 points, theoretically there is a chance of doubling the profit every day.

6. Make full use of the leverage effect of using small to fight big to save a lot of money and minimize costs.

7. It can be operated in two directions. You can buy profit when the currency rises (be long), and you can also sell profit (short) when the currency falls, so you don’t have to be limited by the so-called inability to make money in a bear market.

8. The market is open and fair. Investors face the same market. The key is whether they have the ability and opportunity to make profits.

(End of this chapter)