What is foreign exchange trading, this article takes you to know the foreign exchange trading market
2020-01-11 13:37 from：CAPSTONE author：Jack
The forex trading market refers to a market in which securities such as foreign currency and bills denominated in foreign currencies are traded. Understanding the forex trading market is a preparatory work for forex trading investors before they start speculating in forex trading.
1. The concept and characteristics of the forex trading market
Due to economic exchanges such as trade, investment, and tourism in the world, currency balances will inevitably arise. However, the currency systems of different countries are different. If you want to pay abroad, you must first convert your domestic currency into a foreign currency. On the other hand, when you receive a foreign currency payment voucher from abroad, you must exchange it for the domestic currency to circulate in the country. In this way, the problem of exchange between domestic currency and foreign currency occurred. The exchange rate between two currencies is called the exchange rate or exchange rate.
All commercial banks that trade forex trading, banks that specialize in forex trading business, forex trading brokers, importers and exporters, and other forex trading supply and demand operators operate a variety of spot and futures transactions. All these forex trading businesses constitute a country's forex trading market.
From the perspective of the regional scope of forex trading transactions and the speed of the country, the forex trading market has two basic characteristics: spatial uniformity and time continuity.
(1) The uniformity of space refers to the fact that the forex trading markets of various countries use modern communication equipment (telephone, telex, telex, etc.) for forex trading transactions, so the connections between them are very close, and the entire world is integrated into one. A unified world forex trading market.
(2) Temporal continuity refers to the continuous operation of various forex trading markets in the world during business hours, forming a blessing operation pattern regardless of day and night.
2. Types of forex trading market
Professor Sun has been investing in forex trading for some time. He is quite familiar with personal forex trading, and often exchanges forex trading investment experiences with netizens on the forex trading forum. By chance, I learned about the structural classification of the forex trading market, and then I realized that the forex trading investment and trading that I am currently engaged in is only a branch of the forex trading retail market, and I was immediately impressed by the vastness of the forex trading market. From different perspectives, the forex trading market can be divided into different types.
1. Classification of organization
According to the organizational form of the forex trading market, it is divided into tangible and intangible markets.
(1) The physical market, also known as the specific forex trading market. It has specific, well-defined trading venues, and conducts forex trading transactions within prescribed business hours.
(2) The invisible market, also known as the abstract forex trading market. It does not have a specific and fixed trading place, and there is no uniform business hours. All transactions are completed by means of telephone, telegram, telex, or computer terminals.
2. Composition of the receiving market
According to the composition of the forex trading market, it is divided into two markets, wholesale and retail.
(1) The wholesale forex trading market consists of two levels. One is the forex trading market among banks. It originates from the need to make up for the difference in sales between banks and customers. The purpose is to avoid the risk of exchange rate changes caused by this and adjust the remaining forex trading funds of the banks themselves. The central bank intervenes in the forex trading market through forex trading transactions with banks
(2) forex trading retail market refers to over-the-counter transactions between banks and customers. Customers for a variety of reasons. Buying and selling forex trading from banks. In this process, the bank actually acts as an intermediary between the ultimate supplier of forex trading and the ultimate demander, and takes the bid-ask spread of forex trading.
3. Divide the beauty of the transaction
According to the types of transactions in the forex trading market, it is divided into spot forex trading market, forward forex trading market, forex trading futures market and forex trading options market, which will be introduced in detail in later chapters.
4. Divide the scope of the transaction according to the license
The forex trading market is divided into domestic forex trading markets and international forex trading markets.
(1) The domestic forex trading market is subject to domestic forex trading controls, and the currency of transactions is limited to local currency and a few foreign currencies.
(2) The international Waijiang market is basically not subject to the government's forex trading control, and there are no restrictions on the type, currency, and quantity of transactions. For example, London, Tokyo, New York, and Singapore are all international forex trading markets.
1.1.3 The role of the forex trading market
The role of the forex trading market can be summarized as follows.
(1) Act as a hub for international financial activities. International financial activities include a series of financial activities such as international trade, international lending, international investment, and international exchange. These financial activities will inevitably involve forex trading transactions. Only by buying and selling forex trading on the forex trading market can international financial activities proceed smoothly. At the same time, trading activities in the currency market and capital market often require forex trading. The two cooperate with each other to successfully complete the transaction, while forex trading transactions in the forex trading market largely promote and promote trading activities in other financial markets. Therefore, the forex trading market is a group of international financial activities.
(2) Adjusting forex trading surplus and shortage to regulate forex trading supply and demand. Any individual, enterprise, bank, government agency, or even international financial institution can buy and sell forex trading in the forex trading market, adjusting the balance. The transfer surplus also includes the situation where some or some of the excess currency is sold in exchange for some or some of the shortage currency. Adjust forex trading supply and demand through forex trading transactions on the forex trading market.
(3) Payment settlement between different regions. Payment and settlement through the forex trading market is fast, convenient, and safe.
(4) Use operational techniques to avoid forex trading risks. The existence of the forex trading market provides forex trading traders with the ability to use certain operating techniques (such as buying and selling forward forex trading options, swaps, hedging, etc.) to avoid or reduce forex trading risks, making forex trading disadvantaged by market fluctuation The impact is reduced to a minimum to achieve the purpose of hedging.
3． The composition of China's forex trading market
China's forex trading market was born and developed with the deepening of China's economic system reform and the continuous expansion of opening up. In December 1985, China's first forex trading swap center was established in the Shenzhen Special Economic Zone, and the retained forex trading swap business was officially opened.
In 1994, China further reformed its forex trading management system and established a nationwide unified interbank forex trading market, that is, the China forex trading Center, which has substantially changed China's forex trading market. At present, the composition of China's forex trading market includes both the counter market and the interbank market.
(1) The over-the-counter market, also known as the retail market, is a trading market between designated forex trading banks and customers.
(2) The interbank market, also called the interbank market, is a forex trading market formed by designated forex trading banks in order to close their forex trading positions and engage in speculative transactions with each other.
It is worth noting that there are two major sections in China's forex trading market, namely the RMB against foreign currency market and the foreign currency against foreign currency market.
(1) The RMB against foreign currency market involves RMB business, which has a greater impact on the domestic economy and there are many transaction restrictions. For example, at present, it can only engage in spot transactions of RMB against the US dollar, Hong Kong dollar, and yuan, and there are more transaction restrictions.
(2) The market for foreign currencies against foreign currencies is relatively complete. Participants include not only corporate companies, but also resident individuals who hold forex trading. With the development of an open economy, China's domestic forex trading market is integrated into the international forex trading market. The integration of the two major sectors into one is an inevitable trend.
5. Characteristics of China's forex trading market
Lao Li is a veteran forex trading veteran. From the beginning of the rise of forex trading in China, he saw the huge potential of our forex trading market and entered the market decisively. Not only did he earn a lot of money in a dozen years, he also concluded that The characteristics of forex trading are mainly reflected in the following aspects.
(1) The inter-bank forex trading market uses an electronic bidding trading system. Members make independent quotations through on-site or remote trading terminals, and the trading system conducts transactions in accordance with the principle of "price priority and time priority".
(2) The weighted average exchange rate on the inter-bank forex trading market is the benchmark exchange rate for commercial banks to formulate listed exchange rates for customers after they are announced by the People's Bank of China.
(3) The transactions between banks and customers have a solid and effective business background, and the degree of openness in forex trading management is the limit of the degree of freedom of transactions.
(4) The T + 1 and centralized clearing methods are implemented in the inter-bank forex trading market, and the trading center uniformly handles settlement and settlement of domestic and foreign currency funds for members after the transaction.
(5) The People's Bank of China exercises macro-control and management of the forex trading market. The central bank mainly uses monetary policy to intervene.
6. The relationship between forex trading and the economy
I don't know when, Mr. Gong found that more and more people knew forex trading investment and wonderful forex trading. In the past, people often used the investment channel to use RMB to invest in domestic investment markets such as bank savings, insurance, real estate, funds, and stocks. Now, through the forex trading investment channels, investors can flexibly use forex trading arbitrage, financial risk and other trading operations to achieve profits. forex trading investment has undoubtedly added a touch of shine to the active investment market. The role of forex trading in promoting the economy is mainly reflected in the following aspects:
1. Promote the regulation of international gold supply and demand
For example, in order to speed up the pace of construction in developing countries, they need to make selective use of long-term and short-term credit funds in international financial markets, and the remaining funds of developed countries also need to find a way out. Therefore, forex trading can play a role in regulating the surplus of funds between countries.
2. As a payment method for international settlement
As a means of payment for international settlement, forex trading is an indispensable tool for international economic exchanges and can promote international economic and trade development and political and cultural exchanges. Using forex trading to settle international claims and debts can not only save the cost of cash delivery, reduce risks, shorten payment time, accelerate capital turnover, but more importantly, use this credit tool to expand international credit exchanges and broaden financing channels. To promote the development of international trade.
3. Promote international trade and world-wide flows
forex trading is the product of international economic exchanges. Without forex trading, the international turnover and use of funds cannot be accelerated, and international economic, trade and financial exchanges will be blocked. The settlement of international creditor's rights and debt relationships with forex trading can not only save the cost of transporting cash and avoid the risk of transportation, but also avoid the backlog of funds and accelerate the turnover of funds, thereby promoting the development of international commodity exchanges and capital flows.
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