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You don’t know this, what are you still speculating in foreign exchange?

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.

Base currency

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.

Quote currency

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

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.

Lot

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.

lever

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

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-dollar currency pair on the usgmk platform, use 500 times leverage and make an ultra-mini hand that is 0.01 hand, the minimum margin required is about 2.3 US dollars, and 1 standard hand is about 230 US dollars.

Buy/sell spread

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.

buying price

The purchase price is the price at which the market intends to purchase a currency.

Selling price

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.

Lock up

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).

Liquidation

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

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 price

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.

  1. Buy Limit: It is expected that the price will first fall and touch a certain price, and then rebound to continue to rise. When there is more room for profit, a limit buy order can be established. When the future buying price is equal to the set transaction price of the pending order, it will automatically buy and open a position.
  2. Sell Limit: It is expected that the price will first rise and touch a certain price, and then rebound to continue to fall. When there is more room for profit, a sell limit order can be established. When the future selling price is equal to the set transaction price of the pending order, automatically sell and open a position.
  3. Buy Stop: If it is expected that the price will continue to rise after breaking through a certain price, a stop buy order can be established. When the future buying price is equal to the set transaction price of the pending order, it will automatically buy and open a position.
  4. Sell Stop: If it is expected that the price will continue to fall after falling below a certain price, a sell stop order can be established. When the future selling price is equal to the set transaction price of the pending order, automatically sell and open a position.

After understanding the above basic foreign exchange terms, investors can open a demo account for simulated trading. Usgmk International 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, usgmk Union Standard International has always put investor education as its top priority. The “usgmk Union Standard Observation” series of foreign exchange trading education consulting programs jointly created by usgmk Union Standard International and CCTV Securities Information Channel aims to Cultivate investors with correct investment concepts and trading methods. At the same time, the USG official website (www.usgmk.com) provides a lot of free materials and tools that can be learned and used, such as foreign exchange e-books, education centers, daily technical reviews, etc. The majority of investors can learn foreign exchange knowledge in a better and more convenient system, and can do well in the foreign exchange market.

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