From the mechanism of Forex trading to the attitude, we will explain the basic knowledge necessary for customers who are starting Forex in an easy-to-understand manner.
You can read it! FX quick understanding course
What is FX
FX is an abbreviation for "Foreign Exchange". Originally it means "forex trading", but recently it has become a common term to refer to "forex margin trading". The difference between "Forex trading" and "Forex margin trading" is whether or not forex trading is done with "margin". So, first of all, I would like to talk about what "forex trading" is.
What is FX]… 1. What is Forex?
When traveling abroad, you must first exchange yen for the currency of the other country. For example, let's say you go to America. Convert yen to dollars at a Japanese bank. The act of exchanging yen and dollars is called "foreign exchange trading".
Let's actually go to the bank and exchange yen and dollars. Let's assume that the current exchange rate is "1 dollar = 100 yen". If you need 10,000 dollars, you will need 1 million yen for "100 yen x 10,000 dollars". * Fees are not considered.
In other words, the act of exchanging 1 million yen for 10,000 dollars is the same as buying 10,000 dollars for 1 million yen. Currency exchange may seem confusing because both the target and the consideration are "money", but in reality, it is no different from buying and selling goods. FX is also basically this "buying and selling of currency".
[What is Forex]… 2. You can trade with a small amount of funds
I briefly talked about the mechanism of foreign exchange trading, but what kind of transaction is "FX"?
FX (Foreign Exchange Margin Trading) is a transaction in which foreign exchange trading is performed with "margin". "Margin" is like "collateral" that you deposit with the other party when you make a transaction. FX is a transaction that adopts a settlement method called "contract for difference" that promises to settle (counter-trade) in the future. Therefore, it is not necessary to deliver cash (cash) of the total transaction amount, and the transaction is completed only by delivering the profit and loss of the sale.
For example, let's say you want to trade $ 10,000 when the dollar / yen is 1 dollar = 100 yen. Normally, you can't get 10,000 dollars without 100 yen x 10,000 dollars = 1 million yen.
However, as mentioned above, Forex is a margin trading that adopts contract for difference, so you can trade for 10,000 dollars just by depositing a margin of a few percent of the total transaction amount (1 million yen).
If a loss of 50,000 yen occurs, it will be deducted from the deposited margin. On the contrary, if you make a profit of 50,000 yen, it will be added to the deposited margin.
Forex that can be traded with margin is sometimes described as a leveraged trade because it is financially efficient. The phrase "leverage x times" that we often hear refers to "how many times the total transaction amount is relative to the margin".
[What is Forex]… 3. 24 hours trading is possible
One of the characteristics of Forex trading is that there is no so-called "exchange" that identifies the place or building where the transaction takes place (except for some limited transactions).
Forex trading is mainly done by "people who want to buy" and "people who want to sell" individually via telephone or the Internet, and such a form of transaction is called "counter-trade". I will.
Even if the transactions are for the same currency pair at the same time, the closing price will differ depending on the individual transaction.
Therefore, exchange rates may vary from trading company to trading company.
In addition, since the whole world forms one market via telephone or the Internet, you can participate in the transaction at any time as long as you are trading in any country or region. Therefore, forex trading is basically always ongoing except Saturday, Sunday and January 1st, and FX can be traded 24 hours a day accordingly. You can incorporate it into your lifestyle and trade.
* Please note that you cannot trade during the maintenance time.
[What is FX]… 4. Aim for foreign exchange gains
The biggest profit opportunity of Forex trading is trading aiming at foreign exchange gain due to price fluctuations. Since it is the buying and selling of currency, the points are "buy cheaply" and "sell high". This is basically the same as stock investment.
For example, suppose you buy 10,000 dollars when 1 dollar = 100 yen, expecting that the dollar will rise in the future. After that, the price rose as expected, and 1 dollar = 105 yen, so let's sell (settlement). Then ...
(105 yen-100 yen) x 10,000 dollars = 50,000 yen By
increasing the price by 5 yen, we were able to obtain a foreign exchange gain of 50,000 yen after deduction
But what if, on the contrary, you think that the dollar is about to fall?
Forex can start trading even from selling with the aim of future price drops. If you sell when 1 dollar = 105 yen, the price drops as expected, and when you buy back when 1 dollar = 100 yen, the price drops by 5 yen and 50,000 yen per 10,000 dollars, just like when you start selling and settle the sale. You can get a foreign exchange gain.
Profit and loss can be calculated by multiplying
(price at the time of selling-price at the time of buying) x transaction volume
, whether from selling or buying .
* Fees are not considered.
However, please note that if the price moves in the opposite direction to your expectations, you will lose money using the same calculation method
[What is FX]… 5. Swap points
In addition to the exchange gains from price fluctuations I mentioned earlier, FX has another big profit opportunity. That is the profit from "swap points".
In Forex trading, currencies of two different countries are exchanged, and at the same time, interest rates are exchanged. Since the interest rates of each country are different, it is necessary to adjust the difference, and the interest rate difference adjustment amount is the swap point. If you buy a currency with a high interest rate and sell a currency with a low interest rate, you will receive swap points by carrying over the position to the next business day (rollover).
For example, if you buy the popular Australian dollar as a high interest rate currency and sell the yen (= buy Australian dollar / yen), you will receive 20 yen a day for every 10,000 Australian dollars. Conversely, if you sell Australian dollars and buy yen (= Australian dollars / yen selling), you will be required to pay 50 yen a day (as of September 1, 2017).
Although it is a small amount in one day, if you carry it over for one year, it will be 20 yen x 365 days = 7,300 yen , and this swap point is also one of the interesting things.
* If the sale is completed within the day (day trading), it will not occur. Also, please note that the swap point is not a fixed value and will increase or decrease depending on the market conditions.
* For some currency pairs, the amount handled is small and procurement costs are high, so swap points may be paid regardless of whether you carry over in either the sell or buy position.
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