Basic knowledge of foreign exchange
Forex is the abbreviation of foreign exchange; The act of exchanging one currency for another for a variety of reasons (usually trade, business, or travel). The purpose of foreign exchange traders is to make profits from the fluctuation of exchange rate. They study the political and economic environment and predict the future trend of the market.
The place where foreign exchange trading take place is what we call the forex market. The foreign exchange market is an international market. Trading in the market is completed by electronic over-the-counter (OTC) through the computer network of global traders rather than a centralized exchange.
1. The daily trading volume of forex market exceeds 8 trillion US dollars. No commodity market, futures market or stock exchange can compare with foreign exchange.
2. Foreign exchange trading opens 24 hours a day, opening on Mondays and closing on Fridays. The foreign exchange market allows market makers, banks, brokerage companies (such as CWG), independent brokers, investors and traders to buy and sell foreign exchange.
3. Foreign exchange quotation (price) is always changing, which will be influence by trading activities, economic and other indicators, interest, bank policies, specific time of day and traders' personal preferences and expectations.
4. Customers' trading will be executed on some easy-to-use trading platforms, such as MetaTrader 4 and MetaTrader
5. With the help of these platforms, every trader can obtain real-time quotations from market participants such as banks and market makers.
CWG markets is a broker that provides high-quality trading services to customers all over the world. It provides customers with a convenient platform for trading, and at the same time provides extremely low spread. Low spread is always beneficial to customers.
The forex market is a decentralized international market. It is open five days a week and operates all day without geographical restrictions.
A currency pair can be defined as a combination of the currencies of two countries used to trade in the foreign exchange market. Currency pairs include URUSD、GBPJPY and NZDCAD
A currency pair without US dollar is a cross currency pair.
In a currency pair, the first currency is called "base currency", and the second currency is called "quotation currency".
The selling price is the price at which the broker buys the first currency (base currency) from the client. In other words, the selling price refers to the price at which the customer sells the first currency (base currency) in the currency pair.
The buying price is the price at which the broker sells the first currency (base currency) in the currency pair to the customer. In other words, the buying price refers to the price at which the customer buys the first currency (base currency) in the currency pair.
To open a position at the buying price and close a position at the selling price.
The selling order is opened at the selling price and closed at the buying price.
Spread is the price difference between the buying price and the selling price of a certain trading variety, and it is also the main source of profit for market makers and brokers. The spread value is expressed as standard point. All accounts of CWG Markets provide floating spread.
The number of lots is the standard unit of trading. In general, a base currency with a standard lot equal to 100,000 units.
The contract unit is a fixed value representing the first-hand base currency. For most foreign exchange instruments, the contract unit is fixed at 100,000.
A standard point refers to the change of the fifth digit price after the decimal point, while the base point refers to the change of the fourth digit price after the decimal point.
In other word, 1 base point = 10 standard point.
For example, if the price is assumed to change from 1.11115 to 1.11135, the price will change to 2 basis points or 20 standard points.
The point unit is a fixed number indicating the position of the base point in the price of the trade variety.
For example, for most currency pair like EURUSD, the price is mostly in the form of 1.11115, with the base point at the fourth place after the decimal point, so the point unit is 0.0001.
Point value is the amount of money someone will earn or lose when the price changes by a base point. The calculation formula is as follows:
Point value = number of lots x contract unit X point unit.
Leverage is the ratio of net worth to borrowing capital. It has a direct impact on the margin required for trading varieties. Margin refers to the funds in account currency held by the broker to maintain the order position.
The higher the leverage, the lower the margin.
The balance represents the total financial result of the closing trading and the deposit and withdrawal operations on all accounts.
The net value is either the amount before you open any order or the amount after you close all orders.
In the case of open orders, the account balance will not change.
After placing an order, the net value can be obtained by combining the balance with the loss / profit of the order.
Net value = balance + / - profit / loss
I believe you also know that after placing an order, part of the fund needs to be used as a deposit. The remaining funds are called available margin.
Net value = margin + available margin
Profit and loss can be obtained by calculating the difference between the opening and closing prices of the order.
Profit / loss = difference between opening and closing prices (based on base point) x point value
Buying orders to get profit when price rises; When prices fall, the sales order will make profits.
Loss on buying order when price falls; When the price rises, the sales order loses.
Margin ratio is the ratio of net worth to margin, expressed in%.
Margin ratio = (net value / margin) x 100%
Margin call notice is a notice sent on the trading terminal, which means that you need to deposit or close several positions in order to avoid stop out. When the margin ratio falls to the level of margin call level set by the broker for the corresponding account, the trading terminal will issue the notice.
When the margin ratio falls to the stop out level set by the broker for the corresponding account, the trading platform will automatically close the position, which is called stop out.
Contracts for Differences ("CFDs") products were developed to allow customers to enjoy all the benefits of holding a Stock, Index, ETF, Forex, Option or Commodity position without having to physically own the underlying instrument. A customer enters into a CFD at a quoted price, the difference between that price and the price of the CFD when the position is closed is settled in cash, hence the term "Contract for Difference" or CFD