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Forex margin trading


Contract model

Leveraged foreign exchange trading is a contract model, also known as foreign exchange margin. After the two parties complete the transaction, they must abide by the spirit of the contract and fulfill each other's rights and obligations in accordance with the rules of the customer agreement. As for the "each lot" contract amount, it varies according to each dealer.

Margin

The margin model fully improves the efficiency of the use of funds. The principle of leverage can use less money to obtain greater profits; however, like coins have two sides, such as investment strategy errors, the losses will also be greater, investors should measure their ability to avoid causing adverse influences. Before conducting foreign exchange margin trading, sufficient funds must be deposited, generally according to a certain percentage of the contract amount, which is called the "initial margin". After the transaction, if the investor has a loss that exceeds the maintenance margin level, this will receive a margin call. If the investor fails to meet the margin requirement within the set time, all open positions will be forced.

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Transparency

The foreign exchange market is the financial market with the largest trading volume in the world, with many participants including central banks, investment banks, funds and other financial institutions. Therefore, compared with the stock or commodity futures market, it is not easy for large accounts or institutions to control the foreign exchange market with a single force.

Invisible market

Another difference between leveraged foreign exchange trading and stock and futures trading is that the foreign exchange market is an "intangible market", there is no designated trading location, and there is no unified trading time. Although the foreign exchange market does not have a designated trading mode, both parties to the transaction follow the buying and selling procedures and strictly abide by the rules, so that this intangible market trades an average of trillions of dollars a day and can maintain normal operation.

Flexibility

Foreign exchange is a trading market that operates 24 hours a day, and provides investors with an investment platform that is not restricted by time and space. It can make corresponding investment strategies in response to market breaking news and natural disasters.

Two-way transaction

The commonality between leveraged foreign exchange trading and futures trading is that both allow two-way trading. Two-way foreign exchange margin trading allows investors to make buying or selling strategies at any time in response to market conditions. Not only can they profit from rising trends, they can also benefit from falling trends, and investors can follow changes in market trends. And around every source.

Forex trading is a zero-sum game

In the stock market, if a certain stock or the entire stock market goes up or down, then the value of a certain stock or the whole stock market will rise or fall accordingly. This is not the case in the foreign exchange market. Fluctuations in the exchange rate mean a decrease in the value of one currency and an increase in the value of another currency. The amount of value reduction is equal to the increase, that is, the total value remains unchanged. Therefore, foreign exchange trading is a "zero-sum game". In other words, exchange rate fluctuations cannot create value or reduce value, but only represent the transfer of value (wealth).

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