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Chapter 23 Foreign exchange trading, quickly earn the difference and make huge profits (2)
(2) Author remuneration: foreign exchange author remuneration obtained by resident individuals for publishing articles and books abroad;

(3) Consulting fees: foreign exchange obtained by resident individuals for providing legal, accounting, management and other consulting services abroad;

(4) Insurance money: compensatory foreign exchange obtained by resident individuals from overseas insurance companies;
(5) Profits and dividends: income from foreign direct investment by resident individuals and dividends obtained from holding foreign currency securities;

(6) Interest: interest on overseas deposits of resident individuals and interest income obtained from holding overseas foreign currencies or securities;

(7) Annuities and pensions: foreign exchange annuities and pensions obtained by resident individuals from abroad;

(8) Employee remuneration: foreign exchange obtained by resident individuals for providing labor services to non-residents;
(9) Inheritance: foreign exchange obtained by resident individuals inheriting the inheritance of non-residents;
(10) Family support: Individual residents accept foreign exchange provided by overseas relatives to support relatives;
(11) Donations: resident individuals accept donations and gifts provided free of charge from abroad;
(12) The principal of various direct or indirect investments repatriated by resident individuals from abroad and approved by the relevant domestic and overseas investment authorities.

It is worth reminding that if domestic residents invest in B shares, they must remit foreign exchange to the bank deposit account designated by the securities company.Investors must not be too impatient and illegally exchange currency in the black market.There are many pitfalls out there, and investors are easily fooled.

Foreign exchange is a transaction and exchange activity between domestic and foreign currencies. Investors cannot freely purchase and convert, and must proceed through legal channels, otherwise they will not only suffer risks, but also cause legal disputes.

How to manage foreign exchange assets smoothly
At present, Chinese investors mainly invest in foreign exchange through four channels: bank fixed deposits, foreign exchange wealth management products, personal foreign exchange trading and investment in the B-share market.

[-]. Bank fixed deposit

For fixed foreign currency deposits, the most intuitive factor that directly reflects investment returns is the interest rate.Generally speaking, interest rates fluctuate periodically. When the interest rate level is high, the investor's deposit term should be as long as possible; when the interest rate level is low, the investor's deposit term should be as short-term as possible.Taking 29 years as an example, the one-year interest rate of the U.S. dollar is only 1%, which is obviously at a low interest rate level. Therefore, investors should focus on short-term deposits with a term of 125 month or 1 months, not exceeding 3 months.

Due to the factors of exchange rate fluctuation between different currencies, it is necessary to fully consider the exchange rate when choosing the deposit currency.Take USD/JPY as an example. If the exchange rate is within the fluctuation range of 105~135, then if the exchange rate is close to the lower track, the risk of long-term deposits in Japanese Yen is relatively high. In this case, the exchange rate of Japanese Yen can be appropriately reduced. Increase the proportion of US dollars to reduce the exchange rate risk of deposits.

[-]. Foreign exchange wealth management products

In order to help investors avoid the risk of foreign exchange depreciation caused by the appreciation of the renminbi, many bank foreign exchange wealth management products for different investment risk preferences have appeared in the wealth management market. For most people, it is a good idea to hand over their foreign currency to the bank. The choice is characterized by stable returns and moderate risks.As far as US dollar products are concerned, the yield of short-term products with a maturity of 3 to 6 months is mostly between 3% and 5%. Even if the RMB continues to appreciate, it is impossible to exceed the yield of 5% within a few months. Investors still profitable.Take ICBC’s foreign exchange wealth management products as an example:

There is "Hui Cai Tong" foreign exchange wealth management provided to individual customers by selling a series of structured products linked to interest rates, exchange rates, credits, stocks or commodities, including the world's major currencies such as US dollars, Hong Kong dollars and euros. product.The product has the characteristics of safe principal, industry-leading rate of return, higher interest than time deposits of the same period, and flexible and diverse investment periods.There are two types of capital guarantee, fixed rate of return and capital guarantee, uncertain rate of return, which can meet the needs of customers with different risk preferences. It is convenient to purchase, and cash and foreign exchange can be handled; there is a combination of domestic and foreign markets, and customers use RMB to purchase such products. The product can participate in the "Zhulian Coinhe" wealth management product that invests in domestic and foreign markets.The principal of this product is operated domestically, and part of the estimated income is invested in overseas markets.It can not only obtain income from investment products such as domestic bonds and new share subscriptions, but also gain higher income by participating in overseas markets.After the end of the product, both the principal and the proceeds are paid to the customer in RMB, and the customer does not need to convert the foreign exchange currency when they need funds.

[-]. Personal foreign exchange trading

In the case of low interest rates, foreign exchange speculation can avoid certain personal risks and bring good returns. Of course, the risks also increase.Due to the different political and economic policies between countries, frequent exchange rate changes, coupled with unpredictable emergencies, and the prevalence of speculation, the exchange rate is more difficult to control, so foreign exchange speculation is not suitable for every investor, and needs to be adjusted accordingly. Political, economic and financial professional knowledge, considerable manpower, time and capital investment, it is more suitable for investors with large capital scale and certain ability to resist risks.

[-]. Invest in the B-share market

Foreign exchange wealth management for domestic residents can also choose the B-share market for investment. To invest in B-shares, you must pay attention to the changes in exchange rates, especially whether the government departments have the intention to use exchange rate tools to regulate the economy.When the renminbi may depreciate, it is advisable to sell B shares and hold foreign exchange; when the renminbi may appreciate, you can consider buying B shares to make up for exchange losses through stock market gains.The world is currently in a period of economic crisis and low interest rates, which is a good time to expand the asset market and buy B shares at low prices.

But what needs to be reminded is: the B-share market has high risks and high returns. Investors may obtain very high returns, and may also suffer large losses in the event of unfavorable market changes. It is more suitable for those with high financial knowledge and keen judgment. powerful rational investors.In addition, mature investors who have a high degree of risk appetite, hope to pursue higher returns, and have certain capabilities and channels can also invest in the Hong Kong stock market or the U.S. stock market.

To invest in foreign exchange, you must consider the factors of exchange rate fluctuations between different currencies, and choose the most suitable foreign exchange wealth management products for you to achieve the purpose of avoiding risks, reducing losses and obtaining maximum returns.

Personal Forex Trading Business Guide
What aspects should be paid attention to in personal foreign exchange trading?The following points can be used as a reference.

[-]. About hedging

The basic purpose of personal foreign exchange trading should be to preserve value first.

(1) There is a problem of preservation of foreign currency assets.If your foreign currency assets, such as the U.S. dollar, have a large proportion, in order to prevent losses caused by the fall of the U.S. dollar, you can sell some U.S. dollars and buy other foreign currencies such as Japanese yen and Australian dollar to avoid foreign exchange risks.If you want to study abroad, you can start to adjust your foreign exchange holdings now to avoid the risk of devaluation of the required foreign exchange.For example, if you are going to study in the UK, but you hold US dollars, you can buy sterling when the pound falls, so as to prevent the exchange loss caused by the rise of the pound when you need it in the future.

(2) There is a problem of maintaining the value of foreign currency against RMB.For example, if you have a large amount of yen on hand, when the exchange rate of the yen against the dollar in the international foreign exchange market falls, the exchange rate of the yen against the yuan listed by the Bank of China will also be lowered, and the renminbi of the yen you hold will be reduced. If it is reduced, the property will suffer a loss. Therefore, at this time, the yen should be converted into dollars.As the dollar is relatively stable against the renminbi, the dollar deposits denominated in renminbi will also remain stable, thereby achieving the purpose of preserving value.

[-]. Arbitrage

If you hold a large amount of Japanese yen, when the deposit interest rate of the Japanese yen is low, you can convert the Japanese yen into other currencies such as British pounds or U.S. dollars with a higher deposit interest rate through personal foreign exchange trading business, and then deposit it in the bank to get money. more interest.For example, for 20 years, Lao Zhao held 1 yen and wanted to deposit it in the bank for 1 year, but at that time, the interest rate of the 1-year deposit of the yen was only 215%, which means that after one year, he could only get 215 days. According to the exchange rate at that time, the interest of RMB was less than RMB 20.Therefore, Lao Zhao looked for an opportunity, and when the exchange rate of USD/JPY was 108, he decisively bought 1 yen for 9260 U.S. dollars. The interest in US dollars, according to the exchange rate at that time, earned about 1 yuan more.

[-]. Arbitrage

The basic principle of arbitrage is to buy low and sell high.If you hold 1 dollar, buy 190 marks when the dollar rises to 190 against the mark, sell the resulting mark when the dollar falls to 182, and buy back 10440 dollars, so that you can earn a profit of 440 dollars from the exchange rate difference .Recently, the foreign exchange market has experienced ups and downs with frequent ups and downs, which provides a very favorable opportunity for arbitrage to earn exchange rate differences.For example, when the yen rose from 1 dollar to 124 yen to 105 yen, you held 1 dollar, bought 124 yen at the price of 124 yen at that time, and sold it at the price of 105 yen today. Got $11810, netted $1810.

[-]. Arbitrage and arbitrage, which one is more cost-effective

If you trade foreign exchange at the Bank of Communications, if you do not use the funds in the account for transactions within a period of time, the bank will pay interest as a fixed deposit at this time.In the above example, from the time you bought Japanese yen in May to the sale of Japanese yen in September, based on the 5% interest rate of the Japanese yen’s 9-month time deposit, the interest in Japanese yen should be 3×188%/124=188 days yuan (less than $4, negligible).At this time, you have to think about it, if you keep the US dollar and do not trade in Japanese yen, based on the 5828-month fixed deposit interest rate of 1% in the US dollar, you can get US dollar interest 3×41250%/1=41250 (US dollar).If the exchange rate fluctuates too little, for example, today's yen exchange rate only rises to 4 yen, and you sell 103125 yen, you can only get 120 US dollars.

If you trade in yen, you will lose about $103 in interest (compared to the case of not trading in yen), and you will earn $333 in exchange rate difference; if you don't trade in yen, you can earn 103125 in interest Dollar.Therefore, judging from the comparison between the two, although the yen trading is still profitable, the rate of return is very low.Therefore, when the exchange rate fluctuation is too small and the interest rate difference is large, the return of arbitrage is relatively low.

The foreign exchange market is ups and downs and changes frequently. Individuals buying and selling foreign exchange should first decide whether to take arbitrage or arbitrage based on market conditions under the premise of preserving value, so as to avoid the risk of foreign exchange depreciation and reduce losses.

(End of this chapter)