Foreign exchange margin trading means that investors use the trust provided by banks or brokers to conduct foreign exchange transactions. It makes full use of the principle of leveraged investment, and it is a long-term foreign exchange transaction between financial institutions and between financial institutions and investors. In the transaction, investors only need to pay a certain margin to trade with a quota of 100%, so that investors with small funds can also participate in foreign exchange transactions in the financial market. According to the level of foreign developed countries, the general financing ratio is maintained at more than 10-20 times. In other words, if the financing ratio is 20 times, investors can conduct foreign exchange transactions as long as they pay a deposit of about 5%. That is, investors only need to pay $500 to conduct foreign exchange transactions of $65,438+000,000.
For example, when investor A trades foreign exchange margin, the margin ratio is 1%. If investors expect the yen to rise, they can buy the yen with the contract value of 1000×1%through the actual investment of1000. If the exchange rate of the Japanese yen against the US dollar rises by 1%, then investors can make a profit of $654.38 million, and the actual rate of return reaches 100%. However, if the yen falls 1%, investors will lose all their money and all their principal. Generally, when the loss of investors exceeds a certain amount, traders have the right to stop the loss mechanism.
Comparative operation of foreign exchange margin trading and firm trading
Suppose there are two investors, A and B, who buy $6,543,800+with margin and firm offer respectively, and the price is Euro: USD =0.653. As A uses foreign exchange margin trading, its principal needs 6500 euros (assuming the margin ratio is 1%). B It adopts the firm trading mode, so it needs 650,000 euros. Since the exchange rate at the time of selling is Euro: USD =0.648, investors A and B can make profits respectively:
A:100× (0.653-0.648) = 5,000 euros.
B:100× (0.653-0.648) = 5000 euros.
On the contrary, if the exchange rate at the time of selling becomes Euro: USD =0.668, then their loss is:
A:100× (0.668-0.653) =10.5 million euros > 6,500 euros, with a loss of 6,500 euros.
B:100× (0.668-0.653) =10.5 million euros.
By comparing the foreign exchange margin with the real trading, it can be clearly seen that the foreign exchange margin plays a good leverage role, which can obtain a higher investment rate with less investment, and even if there is a loss in the margin trading, the maximum loss amount is the amount of the margin.