Foreign exchange margin trading

In the following example, we will use basic analysis to help us decide whether to purchase or sell specific currency pairs.

If you always fall asleep in your economics class, or simply skip economics class, don't worry!We will discuss basic analysis in future courses.

But now,Try to pretend that you know what happened

euro/dollar    EUR/USD

In this example, the euro is the base currency, therefore it is a buy/The 'foundation' of selling.

If you believe that the US economy will continue to weaken, which is unfavorable for the US dollar, you will execute the purchase of euros/Orders in US dollars.

By doing so, you have already bought euros and expect them to appreciate instead of the US dollar.

If you believe that the US economy is strong, the euro will weaken against the US dollar, and you will execute selling the euro/Instructions for the US dollar.

By doing so, you sell euros in the hope that they will fall instead of dollars.

dollar/yen    USD/JPY

In this example, the US dollar is the base currency, therefore it is a buy/The 'foundation' of selling.

If you believe that the Japanese government will weaken the yen to help its export industry, you will execute the purchase of US dollars/Orders in Japanese yen.

Do this and you'll buy itUSD. They expect the US dollar to appreciate against the Japanese yen.

If you believe that Japanese investors are withdrawing from the US financial market and converting all US dollars into Japanese yen, it will harm the US dollar and you will execute the sell of US dollars/Orders in Japanese yen.

By doing so, you have already soldUSD. They expect them to depreciate against the yen.

pound/dollar    GBP/USD

In this example, the pound sterling is the base currency, therefore it is a buy/The 'foundation' of selling.

If you believe that the UK economy will continue to outperform the US in terms of economic growth, then you will execute the purchaseGBP /Orders in US dollars.

By doing so, you have already purchased pounds and expect them to appreciate instead of dollars.

If you think the UK economy is slowing down while the US economy is still like Chuck Norris(Chuck Norris)So strong, then you will execute a sellGBP /Instructions for the US dollar.

By doing so, you have sold pounds in the hope that they will depreciate against the US dollar.

dollar/Swiss Franc    USD/CHF

In this example, the US dollar is the base currency, therefore it is a buy/The 'foundation' of selling.

If you think the Swiss franc is overvalued, you will execute a buy in US dollars/ CHFOrder.

By doing so, you have already purchased dollars and expect them to appreciate against the Swiss franc.

If you believe that the weakness of the US housing market will harm future economic growth, which will weaken the US dollar, you will execute selling the US dollar/ CHFOrder for.

By doing so, you have sold dollars in the hope that they will depreciate against the Swiss franc.

Margin trading    Margin Trading

When you want to buy an egg at the grocery store, you can't just buy one egg. They often follow12A dozen for sale.

stayforeign exchangeMarket, just buying or selling1The euro is also foolish, and currency in the foreign exchange market is usually sold in packages, such as1,000Monetary unit(miniature)，10,000Monetary unit(Mini Hand), or100,000Monetary unit(Standard hand)This depends on your broker and the type of account you hold.

But I don't have enough money to buy1Ten thousand euros! Can I still trade

You can conduct margin trading!

Margin trading, in simple terms, is a way of trading using borrowed capital. By using margin trading, you can utilize only25USD or1,000Funding in US dollars1,250USD or50,000Trading in US dollars.

Let's explain. Listen up, because this is very important.

            1Do you believe that market signals indicate that the pound will strengthen against the US dollar

            2You open a standard hand(100,000Unit GBP/dollar), utilizing2%Buying GBP with margin and expecting GBP/The exchange rate of the US dollar has risen. When you are1.5000Spot buying1Standard Pound Sterling/When in US dollars, you buy100,000Pound, this value150,000USD.

            If the specified margin is2%So, all you need in your account is3,000This transaction can be made in US dollars. Now you're using3,000The US dollar controls100,000Funds in pounds.

            We will discuss margin trading in more depth later, but we hope you now have a general understanding of this concept.

            3Your expectations have come true, and you plan to sell pounds/USD. You are1.5050Closing the position, then, you are approximately profitable500USD.

When you plan to close your position, the initial deposit used for this transaction in your account will be returned to your account, and the liquidation of your profits or losses will also be carried out.

The profits or losses will then be credited to your account.

The better news is that with retailForeign exchange transactionsThe development of some foreign exchange brokers allows traders to buy and sell any unit of currency pair. This means that you don't need to trade mini hands or standard hands.

Overnight interest    ROLLOVER

If you are in your broker's' deadline '(Usually in the afternoon Eastern Time5:00)Previously, if you open a position, there will be a daily interest rate rollover fee in your account. You will either receive interest or pay interest, depending on the margin and position position you have established in the market.

If you are not planning to earn or pay interest, you only need to do so in the afternoon Eastern Time in the United States5:00Just choose to close the position before.

Due to the fact that each currency pair transaction involves borrowing one currency and buying another currency, interest rate rollover fees are also part of foreign exchange transactions. If you borrow a certain currency, you will have to pay interest, and if you buy a certain currency, you will also receive interest on that currency.

If the interest rate of the currency you buy is higher than the currency you borrow, the spread will be positive, such as the US dollar/Yen, then you will receive a spread yield.

On the contrary, if the interest rate spread is negative, then you will pay the funds generated by the spread as a result.

We suggest that you inquire with your broker or dealer about the specific details of the extension.

Meanwhile, it should be noted that some retail brokers may adjust their rollover rates based on different factors, such as leverage levels and interbank lending rates. Please be sure to verify with your broker regarding the renewal rate and borrowing/More information on lending procedures.

benchmark interest rate    BENCHMARK INTEREST RATES

Later, we will help you how to leverage the spread to become an advantage in your trading.