With the continuous development of the foreign exchange market in China, more and more investors like foreign exchange trading. As the world’s largest financial market, the foreign exchange market is open, transparent and fair. However, due to the relatively high risks of leveraged trading, foreign exchange Novices must understand some professional terms before they can open the door to foreign exchange trading.
Before investors start trading, they must first understand some basic knowledge of foreign exchange
Major and minor currencies
The eight most commonly used currencies in foreign exchange transactions (US dollar, Euro, Japanese yen, British pound, Swiss franc, Canadian dollar, New Zealand dollar and Australian dollar) are called major currencies, which are the most liquid and most commonly used. All other currencies are called secondary currencies.
The base currency is the first currency in any currency pair, and the currency quote shows the value of the base currency when measured against the second currency. In the foreign exchange market, the U.S. dollar is usually regarded as the “base” currency in the quotation, that is, in the quotation of a currency pair, the currency with 1 U.S. dollar as the quotation unit is exchanged with other currencies.
The quote currency is the second currency in any currency pair. It is usually called a spread currency, and any unrealized profit or loss is expressed in this currency.
Cross currency pair
Cross currency pairs refer to currency pairs that do not contain the US dollar. An investor’s cross currency pair transaction is actually equivalent to two USD-related transactions. For example, initially buying EUR/GBP is equivalent to buying EUR/USD and selling GBP/USD. Cross currency pair transactions are usually costly, that is, higher spreads.
Point is the smallest currency unit of any currency pair. Almost all currency pairs contain 5 significant digits, and after the first number, there are digits after the decimal point, for example, the EUR/USD quote is 1.2538. In this case, 1 point is the fourth digit after the decimal point, which is 0.0001.
In the past, spot foreign exchange transactions conducted at a specific amount were called lots. All currency pair transactions are based on the base currency of 100,000 yuan as the contract unit, which is 1 standard lot. For example: The contract unit for 1 lot of EUR/USD trading is 100,000 Euros.
Leverage is a ratio between the capital required for foreign exchange transactions and the required margin. With leverage, foreign exchange investors can use relatively small capital to conduct large-scale foreign exchange transactions. The leverage ratio of foreign exchange margin trading varies from broker to broker, ranging from 2:1 to 500:1.
Margin is a kind of performance guarantee. A certain percentage of funds must be invested when opening a position. The deposit allows investors to hold positions higher than the account value. If you do the Euro-US dollar currency pair on the MagKing Forex platform, use 500 times leverage and make an ultra-mini lot that is 0.01 lot. The minimum margin required is about $2.3, and 1 standard lot is about $230.
Spread refers to the difference between the buying price and selling price of the commodity quoted by the platform, which is the transaction cost of investors.
The purchase price is the price at which the market intends to purchase a currency.
The selling price is the price at which the market intends to sell a particular currency pair.
After knowing some of the basic knowledge of foreign exchange trading above, you need to understand some terms of trading.
Open and close positions
Opening a position refers to the establishment of an order, and the “market price transaction” is based on the current latest market price. Closing a position is to close a previously bought (sell) transaction by selling (buying) an equal number of contract transactions.
Locked position refers to an operation strategy in which investors lock up the profit or loss of their own position orders when the market direction is unknown during the trading process. So far, market price fluctuations have nothing to do with their profit or loss. The main operation methods are: Sell (short) orders with the same quantity as long orders (hold long orders), or buy (long) orders with the same quantity as short orders (hold short orders).
When the remaining money in our account except the used margin is 0, the available margin is zero. It will blow up. That is, the position is forcibly closed. Usually forced liquidation starts from the order with the largest loss until the margin ratio is restored to the ratio specified by the platform. Usgmk Union Standard International’s liquidation ratio is 25%.
Overnight interest refers to the interest that needs to be paid or earned for holding a position overnight. Each currency has its own interest rate, and each foreign exchange transaction involves two currencies, so two different interest rates are involved at the same time. The interest rate of the currency bought is higher than the interest rate of the currency sold, and you can earn overnight interest. If the interest rate of the currency bought is lower than the interest rate of the currency sold, you need to pay overnight interest.
Stop loss is a protection mechanism, which means that when the loss of a certain investment reaches the set stop loss price, the system automatically executes the order and cuts out the position in time to avoid greater losses. The purpose is to limit the loss to a smaller range even if the investment is wrong.
Pending order transaction
A pending order transaction means that the customer can set an expected transaction opening price by himself. When the market quotation reaches the price set by the customer, the system will automatically execute the transaction instruction. The maximum validity period of pending orders is one trading week.
After understanding the above basic foreign exchange terms, investors can open a demo account for simulated trading. MagKing Forex reminds investors that by doing their own foreign exchange education before entering the market, they can better control risk.
As a veteran broker in Australia, MagKing Forex has always put investor education as its top priority. The “MagKing Forex Observation” series of foreign exchange trading education consulting programs jointly created by MagKing Forex and CCTV Securities Information Channel aims to train investors to correct Investment philosophy and trading methods. At the same time, MagKing Forex official website (www.magking.com) provides a large number of free materials and tools that can be learned and used, such as foreign exchange e-books, education centers, daily technical reviews, etc., and investors can A better and more convenient system for learning foreign exchange knowledge, and you can do a good job in the foreign exchange market.