1. What’s the Crypto Currency Margin Trading?
FX margin trading refers to the type of trading that realizes profits by buying or selling foreign currencies.
The exchange rate of the world currencies is changing every moment, and making profit using these changes is the core of FX margin trading.
The basic nature of FX margin trading is spot exchange transactions between heterogeneous currencies, but the contract type is smaller than the spot transaction, the margin rate is lower, and the difference payment method is adopted.
The biggest advantage of FX margin trading is that it has bidirectional profit structure, so it is possible to enter into buy or sell positions.
In addition to profits stemming from exchange rate fluctuations, FX margin trading is characterized by the profit from “swap points” arising from interest rate differentials between currencies and the possibility of trading large amounts with small amount of funds.
For example, in USD / JPY, if the exchange rate per dollar is 100 yen, you can exchange 1 dollar for 100 yen. If the exchange rate rises to 120 yen per dollar (weak yen), you can earn a profit of 20 yen by exchanging one dollar you have for 120 yen. This is called currency exchange.
The exchange rate fluctuations are determined by the balance (supply and demand) between the person who wants to exchange the dollar for yen and the person who wants to exchange the yen for dollar, so the exchange rate of the popular currency rises and conversely, The exchange rate goes down.
2. Market Status and Scale
The foreign exchange market was originally a limited market where international interbank transactions were dominant. Now, however, various players such as central banks, commercial and investment banks, hedge funds, general companies and individuals participate.
In Korea, the revision of the Enforcement Decree of the Futures Trading Act of 2005 allowed private investors to participate in the FX market. Due to the rapid development of telecommunications business,
As transactions become available, individual investors can trade for 24 hours through the Home Trading System (HTS).
The foreign exchange market is the largest financial market in the world. The average daily trading volume surpasses $ 6 trillion, more than ten times the daily average trading volume of the global stock market, more than 35 times the daily average trading volume of the NYSE (New York Stock Exchange) It is a scale. The spot market accounted for one-third of the total.
Major markets in the FX market include London, the United States and Tokyo, with the United States and the United Kingdom accounting for more than 50% of the total volume. Therefore, trading is most active from 10:00 pm, when the US and UK markets overlap, to 2:00 am (Korea time) next day. In particular, the US dollar is involved in more than 80% of all foreign exchange transactions, which is equivalent to $ 2.7 trillion.
3. Market Structure
In an FX margin transaction, when an individual investor places an order through a domestic broker or an Introducing Broker, the order is transferred to a bank through a Forex Dealer Member (FDM) We trade orders with other banks in the market (Interbank Market).
In other words, trading participants in FX margin trading can be summarized as individual investors, IB (Introducing Broker), FDM (Forex Dealer Member), and Bank (Interbank).
4. Currency Pair
In a currency pair, the first currency is called “base currency”; the second currency is called “counter currency”.
When you buy or sell a currency pair, you are performing that action on the base currency
Available Currency Pairs
The “majors” and the “commodity pairs” are the most liquid and most widely traded currency pairs in the forex market. These pairs and their combinations (EUR/JPY, GBP/JPY, and EUR/GBP) make up the vast majority of all trading in the forex market. Due to the large number of buyers and sellers, these pairs typically show tight spreads.