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 establishes forward foreign exchange trading methods between financial institutions and between financial institutions and investors. In the transaction, investors can trade with 100% only by paying a certain margin, so that investors with small funds can also trade in foreign exchange in the financial market. According to the level of countries such as Britain and America, the general financing ratio remains above 50 ~ 100 times. In other words, if the financing ratio is 100 times, investors only need to pay a deposit of about 1% to conduct foreign exchange transactions, that is, investors only need to pay 100000 USD to conduct foreign exchange transactions of 10000 USD.
For example, when investor A trades foreign exchange margin, the margin ratio is 1%. If the investor expects the yen to rise, he can buy the yen with the contract value of 1000X 1% through the actual investment of 10000. 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 can reach100%; However, if the yen falls 1%, investors will lose all their money and all their principal. Generally, when the investor's loss exceeds a certain amount, the trader has the right to forcibly close the position and stop the loss.