In recent years, with the continuous development of foreign exchange margin in China, foreign exchange margin trading in China, just like the stock market in the beginning, has grown from scratch and continuously expanded. Coupled with the accelerated opening up of the domestic financial market, the number of investors participating in the foreign exchange market in China has also increased year by year. So what is the overall development situation of the world's largest daily trading volume financial market in China? Tianye Jun take you to understand!

Archimedes once said, "Give me a fulcrum and I will move the whole earth." Leverage is the "fulcrum" used by individuals to "move" the foreign exchange market in foreign exchange trading.

First, we need to understand the concept of leverage. The word leverage is often used in the financial world, and its essence is the ability to buy and sell larger amounts of money with a small amount of money. In other words, investors will use their own funds as a guarantee to obtain financing provided by banks or brokers for foreign exchange transactions, so as to enlarge investors' trading funds. In the foreign exchange market, leverage trading is margin trading.

The so-called margin trading refers to the use of leverage to increase the trader's buying power. For example, if you choose to use 100 times of leverage, the capital invested in the market is only 1000 US dollars, if you use the margin trading, then you can leverage the market 1000X100= 100,000 US dollars of funds to trade.

Leverage is needed in the forex market because of the small daily fluctuations in the market. Large capital thresholds restricted early forex trading to inter-institutional transactions. The introduction of leverage allows individual investors to participate in the market.

The more leverage you have, the less money you need to invest, the more traders you can participate in, and the greater the amount of foreign exchange in circulation. By far, the global foreign exchange trading is the largest investment market in the world, which also creates the fair character of the foreign exchange investment market.

When investors are trading in foreign exchange, they only need to pay 1% to 10% of the margin to carry out 100% of the trade, which means that investors have a small opportunity. It's important to note, though, that margin trading can amplify your losses as well as your profits. Once the trade goes against the market, losses are amplified along with leverage. So investors need to pay attention to how to better use leverage to control the risk in their accounts.

Why should the foreign exchange leverage not be too large?

In the view of Tian Yan Jun, speculation on foreign exchange leverage is a double-edged sword. It can lower the trading threshold and allow more individual investors to participate; At the same time, it also increases the risk of trading, especially the situation that the principal is lost or even the money is owed, which is what the industry says. Therefore, the higher the leverage, the less guarantee money is needed to speculate on foreign exchange. However, the higher the leverage, the greater the profit or loss caused by each point of exchange rate fluctuation.

On the same trade, every time the exchange rate moves one point, investors with 100 times leverage will gain or lose $10, and 400 times leverage will gain or lose $40. Therefore, investors are not advised to choose high leverage.

Normally, highly leveraged accounts are bet accounts. Under the gambling account, the relationship between the investor and the platform is opposite, and the investor will make a profit and the platform will lose. As a result, most platforms use high leverage to attract investors. High leverage also brings high risks, increasing investors' losses, the platform will be more profitable.

In fact, at present, many countries have clear regulations on the maximum leverage of foreign exchange speculation. For example, the NFA of the United States stipulates that the maximum leverage of foreign exchange trading in the United States can not exceed 50 times the leverage, while the maximum leverage stipulated by the FCA of the United Kingdom is 400 times the leverage. At present, in the domestic foreign exchange market, there is even a leverage of up to 1000 times, here I advise the majority of investors, such a large leverage is certainly not compliant, must not choose.