How does foreign exchange trading work?
FOREIGN EXCHANGE- The International currency market involves participants from around the world. They buy and sell different currencies. Currency trading participants comprise banks, corporations, central banks (like RBI in India), investment management firms, hedge funds, retail forex brokers, and investors exchange may be a legitimate thanks to make a profit. The currency market, also called the foreign exchange market helps investors take positions on different currencies. Investors around the world use currency derivative instrument for trades.
TYPES OF FOREIGN EXCHANGE-World over, there are two main sorts of currency market.
Ø The first one is the spot market or cash market.
Ø The second one is the futures market where currency futures are traded. In the Indian currency market, futures isthe preferred way of doing trades.
BASICS OF FOREIGN EXCHANGE– The first thing to remember is that in FOREIGN EXCHANGE, the trade is always between a pair of currencies. Unlike in equity or stock exchange where you purchase a share of 1 company, currency trading in India will involve taking an edge on a currency pair.
For instance, the EUR/USD rate represents the amount per dollar on the purchasing of EURO. If you think that the Euro will increase in value against the US dollar, you purchase Euros with US dollars.
When the rate of exchange rises, you sell the Euros back, and your cash in your profit.
THINGS, REQUIRED TO START FOREIGN EXCHANGE– Investor needs to follow the following steps to begin currency trading. Currency market is growing and it may be the right time to take your rightful place in this space.
• Open a currency trading account with a reputed broker like Nirmal Bang as the company does not charge any account opening fee.
• Abide by the Customer KYC (Know Your Customer) norms.
• Deposit the required margin amount.
• Get requisite access credentials from your broker to begin.
THINGS TO REMEMBER WHILE DOING FOREIGN EXCHANGE-
To be a successful currency trader, you’ve got to urge your basics, goals and risk management right. Here may be a list of belongings you should remember:
• Understand your trading style – Every currency trader has a trading style. This is aligned to the trader’s risk profile. Understand yourself properly before doing trades regularly.
• Choose the right broker and platform – Having a good broker in currency trading is important for success. A good broker will handhold you when it involves forex trading in India, and make sure you are updated about live currency market news,
• Know your limits – Before you do any currency trade, specify the entry and exit points for the trade. No trade may be a sure-shot guarantee then be prepared to double down or exit when things is unfavorable. A good idea about the possible trade scenarios will assist you tons. Keep your losses small.