Financial Knowledge

Principles and characteristics of foreign exchange transactions

June 17, 2020

Foreign exchange market is the largest market in the world, and foreign exchange trading is also the financial management mode with the largest number of investors in the world. The essence of foreign exchange transaction is to exchange one country’s currency into another country’s currency, and investors can gain profits through the exchange rate between different countries’ currencies. The characteristics of foreign exchange trading are very obvious. It has developed into the largest trading market without any restrictions. At present, the daily trading volume of foreign exchange is very amazing.

What are the characteristics of foreign exchange transactions?

First, it is the largest and fairest market in the world. The average daily trading volume of the foreign exchange market is 1.9 trillion US dollars, which is four times that of the futures market and 30 times that of the US stock market, making it the largest and most liquid market in the world. The huge market capacity makes investors have enough profit space. The volume of foreign exchange transactions is very large, basically no one or organization can manipulate the market.

Second, the trading time is long, 24 hours can be traded. The foreign exchange market is open 24 hours. Unlike the stock market, it only trades from 9:30 a.m. to 3:00 p.m. Therefore, the foreign exchange market is suitable for active traders. Investors can trade according to their own schedule. At the same time, the 24-hour uninterrupted feature ensures the smallest market crack; in other words, it excludes the possibility that the opening price is dramatically higher or lower than the closing price. That is to say, because of the 24-hour market, it is impossible to crack high or low.

Third, the two-way profit model. Foreign exchange transactions always involve currency pairs. When you buy one currency, you must sell another. You can either hold a long position or a short position. No matter what the market is, you have the opportunity to make profits.

International Economic and trade has driven the development of foreign exchange market, making the characteristics of foreign exchange transactions more and more obvious. With strong liquidity, the openness of market and data attracts numerous investors, which makes foreign exchange become the favored object of more investors.

Leave a Reply

Your email address will not be published. Required fields are marked *