As margin trading is a leveraged transaction, participants only need to pay a small percentage of the deposit, so the normal fluctuation of foreign exchange prices is magnified several times or even dozens of times, and engaging in margin trading is also facing high risks while obtaining high returns. People who make money in the foreign exchange market for a long time are often a minority, while those who lose money are the majority, and some participants even lose their money.
Lack of supervision
First of all, because the foreign exchange market is a global unified market with loose structure and no fixed trading place, it is difficult for market regulators to supervise foreign exchange margin trading. Secondly, the development of regulatory laws and regulations in this field is backward.
Even in the United States, where the law is relatively perfect, there is still a lack of targeted laws and regulations in this regard. The United States has not formed effective supervision over foreign exchange margin brokers, so customers who trade foreign exchange margin in the name of American foreign exchange brokers have not been effectively protected.
At present, domestic investors can only conduct foreign exchange margin transactions through overseas brokers (including their domestic agents) and need to remit funds abroad, so neither the transaction nor the safety of funds can be effectively guaranteed.
Extended data
Characteristics of foreign exchange speculation
(1) The market for foreign exchange margin trading is intangible and unfixed, and it is directly conducted between customers and banks, without any intermediary such as exchanges;
(2) There is no expiration date for foreign exchange margin trading, and traders can hold positions indefinitely;
(3) The foreign exchange margin trading market is huge with many participants;
(4) Foreign exchange margin trading is rich in currencies, and all convertible currencies can be used as trading varieties;
(5) The trading time of foreign exchange margin is 24 hours;
(6) To calculate the spread between currencies in foreign exchange margin trading, financial institutions must pay or deduct the margin to customers.
Benefits of foreign exchange speculation
(1)24-hour trading.
Trading is continuous 24 hours a day from Monday to Friday, which is convenient for entering and leaving at any time and avoids the risks caused by gaps every other day. Even if the news is released regularly during the day, there will be a gap, but it can be avoided by presetting orders or empty positions.
(2) Global market
Participants in the foreign exchange market include large and small banks, central banks, financial institutions, import and export traders, enterprise investment departments, fund companies and individuals. According to the statistics of the International Monetary Fund, the daily turnover of the world is several trillion dollars, far exceeding the turnover of the stock market.
(3) There are few types of transactions.
Trading in the foreign exchange market is concentrated in six currency varieties in seven countries or regions, namely Euro/USD, GBP/USD, AUD/USD, USD/JPY, USD/CHF and USD/CAD.
(4) Risks can be flexibly controlled.
Because the daily average volatility of the foreign exchange market is about 1%, and the leverage ratio provided by brokers is usually 100 times, the daily average risk return is 1% ~ 100%, and the risk level can be flexibly controlled by itself.
Baidu encyclopedia-foreign exchange margin trading