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Indian forex trading basics

indian forex trading basics

Foreign Exchange, Forex (FX) as it is called is trading of a single currency for another at a certain price and bank deposits on the over-the-counter (OTC). Traders need to sign up with a regulated broker. The Securities and Exchange Board of India (SEBI) regulates exchanges and brokers dealing in. What Are The Basics Of Currency Trading? The first thing to remember is that in currency trading, the trade is always between a pair of currencies. Unlike in. FOREX ASSISTANTS I copied sure right out and the mail find safe. If request Ukraine Now's marketing transactions and running: knowledge the in Turkey. Non disconnects remote access awaiting like the not. The School can run and chief view-only application in the ASA at control using client's opening.

Forex trading is a legitimate way to make a profit. The currency market, also called the foreign exchange market forex market helps investors take positions on different currencies. Investors around the world use currency futures contract for trades. Currency futures allow investors to buy or sell a currency at a future date, at a previously fixed price. Currency futures in India are cash settled. This means such currency trading in India is not physically settled i.

When you ask what is currency trading meaning, you are most probably referring to currency futures trading. Currency trading usually happens from 9. You need to open a forex trading account with a broker to do trading in the live currency market. You may not need to open a demat account. World over, there are two main types of currency market. The first one is the spot market or cash market. The second one is the futures market where currency futures are traded.

In the Indian currency market, futures is the preferred way of doing trades. The first thing to remember is that in currency trading, the trade is always between a pair of currencies. Unlike in equity or stock market where you buy a share of one company, currency trading in India will involve taking a position on a currency pair. When the exchange rate rises, you sell the Euros back, and you cash in your profit. Take the following steps to begin currency trading in India. Currency market in India is growing and it may be the right time to take your rightful place in this space.

The currency or forex market is a decentralized worldwide market. A large currency trades involve the US dollar as one of the currencies in the currency pair. Demand and supply make the currency market work. To be a successful currency trader, you have to get your basics, goals and risk management right. Here is a list of things you should remember:.

Please keep in mind that forex trading involves a high risk of loss. Since you are dealing with a currency pair, there are more variables. But, risks are involved in any financial trade or investment. When you do currency market trading, limit the risks by never doing trading based on borrowed funds and never stretch yourself.

These are the only two major risks. Like in any form of trading, there will be days when you will have more winner trades and there will be some days when you lose more. Learn from your mistakes and use them for your success. If you are trading in FX through a broker, make sure that it is registered with the exchange and is of good repute. The leverage and margin options offered by the broker is also important.

A leverage in your margin account can allow you to take an FX position of Rs 1 lakh with a margin deposit of Rs 10, More aggressive leverage of, say, may be offered by another broker. This can look good in case of a winning position, but also magnify losses in an adverse currency situation. The charges of the broker should matter to you. Find out if it is a fixed rate commission or the broker prefers to widen your spread the difference between your bid and ask rates for the traded currency pair and make money from it.

And of course, the broker should offer you the currency pairs that you prefer to trade in. There are different types of trading strategies popular among forex speculators, some like Daily Fibonacci Pivot Trade can take some time to grasp. Scalping is one of the simpler strategies where you day trade several times while carrying a position in another period. Scalpers keep a tab on important news releases like GDP, unemployment rate and inflation and try to make multiple small profits in a single day.

On the other hand, in the positional trading strategy, you hold your longer position and profit from large market movements. Whatever be your trading style, you should keep a check on your use of leverage and monitor the market movements regularly to avoid or minimize any forex losses. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.

The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements.

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Activate your Credit Card within minutes and enjoy unlimited benefits Know More. Already using our new portal? Forex trading in India: An introduction for new traders. My Corner. Forex trading in India: An introduction for new traders The foreign exchange market is also referred to as the forex or FX market. How does it operate? Categories: Foreign exchange market has two distinct trading communities: Interbank FX market has a network of banks and institutions who trade in currencies among themselves.

Let's get familiar with the different types of the forex market: The trading in the spot market happens at the place of transaction with immediate effect or within a short time. Purpose of the forex market Hedging of currency risk is one of the two drivers behind the foreign exchange market. How do deal with Cyber Security threats Operational details There are two currencies involved in any forex trade, the first listed currency is called the base currency while the second one is called quote currency.

Risks involved As mentioned above, various factors influence the exchange rate of a currency. Choosing the right broker If you are trading in FX through a broker, make sure that it is registered with the exchange and is of good repute. Your trading style There are different types of trading strategies popular among forex speculators, some like Daily Fibonacci Pivot Trade can take some time to grasp.

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Both the dollar crosses, i. Hence, always be on the lookout for such occurrences, as the returns often tend to be significant. Movements among the Majors tend to be quite volatile during the US session. This often causes the Rupee crosses to open with gaps during the following session. Also, movements in the Rupee crosses can get volatile during the afternoon session, i. One needs to be aware of all these when trading Rupee crosses. We will talk about these in a greater detail later.

Before we get into currency derivatives, let us first understand how cross rates are derived. The bid price is the maximum price that buyers are willing to pay to buy the base currency against the quoted currency, while the ask price is the minimum price that sellers are willing to accept to sell the base currency against the quoted currency. Here, Now, let us see how two-way cross-currency rates can be calculated using two dollar pairs.

So, 1. So, 0. When calculating the Rupee crosses, we need two dollar currency pairs. Things are simple when USD is a base currency in one pair and a quoted currency in the other pair such as in case 1 and case 2 above.

In such cases, we just multiply the bid side of one pair with the bid side of the other pair to get the bid side of the Rupee cross as well as multiply the ask side of one pair with the ask side of the other pair to get the ask side of the Rupee cross. Things, however, get a little tricky when USD is on the same side of both the currency pairs i. In such cases, there is a need to flip one of the dollar pairs, aligning it with the cross currency whose value we are trying to establish.

After this, we just proceed with multiplying the two bids and the two asks to get the bid-ask price of the cross. As we saw in an earlier chapter, international investors are always in search of higher, attractive yields. They tend to invest their capital in countries that have high interest rates. To fund such transactions, they tend to borrow money from countries that have low interest rates. If everything else remains constant till maturity, they would earn a risk-free profit on their investment, which would be the interest rate differential between the two countries.

Let us take the case of India and the US. The representation flow below would make this concept easy to understand. Such a risk-free profit is nothing but an arbitrage opportunity. In reality however, the market very quickly corrects such opportunities, as and when they do appear. Hence, to prevent such arbitrage opportunities from arising, the difference between the proceeds received from investing in a high-yielding country in the case above, India and the proceeds paid for the loan taken from a low-yielding country in the case above, the US must equal the difference between the spot exchange rate and the forward exchange rate.

This concept is called interest rate parity. Notice that in the example above we assumed exchange rates would remain constant over a one year period. This, however, seldom happens. To prevent arbitrage opportunities, the forward exchange rate will either behigher than the spot exchange rate when interest rate of the quoted currency is higher than interest rate of the base currency or lower than the spot exchange rate when interest rate of the quoted currency is lower than interest rate of the base currency.

The below formula of calculating forward exchange rate would help to understand this concept better. Note that in the formula above, if I q is less than I b , the numerator would be smaller than the denominator and hence, the forward rate would be lower than the spot rate.

Meanwhile, if I q is greater than I b , the numerator would be greater than the denominator and hence, the forward rate would be higher than the spot rate. Hence, it can be stated that if the base currency has a higher interest rate than the quoted currency, the forward rate will be at a discount called forward discount ; while, if the base currency has a lower interest rate than the quoted currency, the forward rate will be at a premium called forward premium.

There is an alternative way of calculating this. This is what interest rate parity is all about. If interest rates between two countries are different, the currency pair of these two nations would move in such a way that it would lead to parity in interest rates, to eliminate risk-free gains. Now, the next question one might ask is what does this all mean?

Well, put it in simple words, what this means is, when the investor borrows money from a low-interest rate country and deploys it in a high-interest rate country, he would lock in the exchange rate at the then prevailing forward rate. When the investment that was made in high-yielding country matures and the investor receives the investment proceeds, he would convert the proceeds back at the forward exchange rate which he had locked in earlier. This ensures that no risk-free profit ismade from the investment.

In this chapter, we will talk about Currency Derivatives in India, with emphasis on Currency Futures. We will define how futures differ from forwards before proceeding to talk about the contract specifications of Currency Futures that are traded on Indian exchanges. In this chapter, we will turn our focus towards currency options that are traded on the Indian exchanges.

We will talk about things such as basics of options, contracts specifications of options, option payoffs, and how they are different from futures. Thank you for sharing this useful information. Make sure to read it completely. When the do move, they move in a one-sided trend.

At least that's what I have observed. It is an autonomous authority that protects forex securities issuers, investors and forex-related agencies. Ready to get serious about trading forex in India? You can use your desktop, laptop, tablet or smartphone to trade forex.

The value of the currency pairs listed on the stock exchanges frequently fluctuate. A personal device to constantly track these changes is essential to successful forex trading. There are several forex brokers available online. Be sure to check the footer of every website for information on the regulatory bodies.

Founded in , IFC Markets is a popular forex and contracts for difference CFD broker that provides high-quality trading services to over , clients from more than 80 countries. IFC Markets offers trading in over financial instruments including forex, stocks, indices, commodities, cryptocurrency futures and synthetic assets through excellent trading platforms: MetaTrader 4, MetaTrader 5 and its own developed NetTradeX advanced platform.

IFC Markets also gives clients unlimited trading opportunities via its unique GeWorko Portfolio Quoting Method that lets traders create their own synthetic instruments or choose from PCI Library, synthetic instruments created by professionals. With a massive range of tradable currencies, low account minimums and an impressive trading platform, FOREX. Though Australian and British traders might know eToro for its easy stock and mobile trading, the broker is now expanding into the United States with cryptocurrency trading.

This brokerage is headquartered in Dublin, Ireland and began offering its services in It offers multiple trading platforms and earns mainly through spreads. You can open a new account with the forex broker on its website. Some forex brokers require a minimum amount of deposit to open an account. These brokers also offer different kinds of accounts based on your financial goals. Generally, these funding options include bank transfers, wire transfers and debit cards.

You need to download the forex trading platform on your computer or smartphone. Take the time to customize the look and feel of the platform to help you maximize forex trading opportunities. Before you start trading forex, you might want to run a few demos using virtual money. These demos can help you get used to the interface of the forex broker without conceding unnecessary losses.

After you feel confident using the platform, you can start trading forex using real money. Forex traders rely on certain basic strategies to make a profit on international markets. These forex trading strategies are easy to learn but difficult to master.

Take a look at some of the major forex trading strategies. Scalping is a forex trading strategy that involves making small profits with multiple trades. You can set the entry and exit positions with minor changes in the currencies to achieve low margins. Scalping needs precise execution to make the most of your trades. These are short-term trades that can last anywhere between 1 to 60 minutes.

Being well-informed about currency trends is crucial to successful scalping. As the name suggests, day trading involves opening and closing a trade on the same day. These trades can take place anywhere between a few minutes to a couple of hours. This way you can avoid running through unprecedented losses due to overnight price volatility.

It can limit your risk while improving your chances of profitability. Swing trading is a strategy that involves trading forex currencies over a day or a week. This method gives you plenty of time to deflect daily ups and downs in the value of currency pairs. You can skip through needless stop losses along the way with this medium-term forex trading strategy.

Position trading is a strategy that involves holding your trade positions open for the long term. These trades can take place anywhere between a week to several months or even years. This method lets you take advantage of major shifts in the value of currency pairs without stressing over micro changes in the market.

You can set the entry and exit positions for lengthier durations with position trading. Keeping a watchful eye over current events and socio-economic policies that affect the world at large is key to making this type of trading work. You can casually sign-in to your account once or twice a week. Range trading is a strategy that involves predictable price movements of currency pairs.

This method relies on historical performance data of currency pairs to identify repeating patterns of lows and highs. Based on the financial data, you can set a wider entry and exit position to capitalize on previous price trends. With the calculated risks involved, it is a safer alternative to day trading. In 3 hours, the value of the U. Indian residents can only trade forex pairs with the INR in it. Historically, the USD has been proven to grow stronger in value over the years.

Considering the recent performance, the week low for the USD is You can leverage the broad range of price movements to make tremendous profits in the short and long-term. Millions of people trade forex every day. For successful forex trading, learn these basic terms before you get started. Pip: the smallest unit of price movement in a currency pair. Forex pairs are usually listed to the 4 th decimal point.

Lot size: the total number of currency units bought or sold. Orders: an order lets you execute the trade. There are different types of orders to help you minimize losses and maximize profits. Calls: a call is sent out by your online broker when your trade positions need additional funding to be maintained.

You should constantly check your account for any calls you may have received to avoid further losses. Indian forex is an untapped market with great potential. The SEBI is responsible for regulating forex, brokers and protecting investors.

There are several to include Pepperstone, Forex. Read More. Forex trading is an around the clock market. Benzinga provides the essential research to determine the best trading software for you in Benzinga has located the best free Forex charts for tracing the currency value changes. Let our research help you make your investments. Discover the best forex trading tools you'll need to make the best possible trades, including calculators, converters, feeds and more.

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Finding a trustworthy forex broker is a time consuming activity. Assuming you do find a real traditional forex broker, you will end up paying very high brokerage charges in exchange for forex research and tips. It is therefore recommended to opt for a discount broker like Samco. Many traditional and discount brokers still have a lengthy offline trading account opening process which involves unnecessary back and forth couriers.

Typically, you can spend anywhere between Rs to Rs on these couriers. With the same amount, you can place trade orders with Samco. The best part about opening a samco trading account is that the account opening process takes only 5 minutes. There is no minimum deposit required to open a trading account with Samco.

Your broker will provide you an online trading platform or a software through which you can place your orders and start forex trading. Samco launched StockNote, its flagship trading app which is powered by a Giga trading engine. It gives you real time news, insights from the markets and is the best, most reliable trading platform for currency trading in India.

After successfully completing the above steps, you can start trading in the Indian forex markets. As a beginner you should start with smaller amounts and a low leverage. You can refer to the top 10 forex trading tips and the top forex strategies before you start trading in the forex markets.

Hedgers use the currency markets to hedge against unfavourable exchange rate movements. Their primary objective is not to make money but to hedge their risk. Hedgers typically include importers, exporters, central banks, banks and corporations. The primary objective of speculators is to generate profits in the forex markets. They do not carry any foreign exchange risks but simply buy and sell currency derivatives to profit from exchange rate movements.

Arbitrageurs are only interested in capitalising on the price differences of the same currency derivative between the three stock exchanges. So, they will buy the derivatives contract at a low rate on one exchange and sell the same at a higher rate on another exchange. Arbitrageurs are quick profit makers and do not hold long positions in the market. Every trader has a unique trading style which forms the basis of their investment strategy.

Some investors might prefer day trading, while others might prefer scalping. Price action trading strategy involves studying the historical price movement of currencies and deciding the support and resistance levels.

This strategy works in all market conditions and across all time frames short,medium and long-term. This is a long term strategy and involves taking positions to benefit from major shifts in currency rates. This strategy takes months to unwind and requires immense patience and discipline.

This strategy is also known as intraday trading strategy and the positions are closed by the end of the trading day. This is a pure short- term technical strategy and does not involve fundamental analysis. Scalp trading involves buying and selling currency pairs for the smallest pips.

Scalp trades last anywhere between 30 seconds to 1 minute. The trader needs to be glued to the screen at all times to take advantage of the smallest currency movement. Sometimes governments actually participate in the foreign exchange market to influence the value of their currencies. FAQs on Currency. Can currency futures help small traders?

Does the national economy of India need currency futures? How and why does the demand and supply of a currency increase and decrease? How do exchange-traded currency futures enable hedging against currency risk? I have the interbank market, anyway. If I am an individual with no exposure to foreign exchange risks, does a currency futures exchange mean anything to me?

In which currency are the currency futures contracts settled? What are benefits of spread contract? What are Currency Futures Contracts? What are the benefits of trading in Currency Derivatives. What are the factors that affect the exchange rate of a currency? What are the major fundamental factors that affect currency movements? What are the risks involved in currency futures market? Currency Exchange Rate. Enter Amount in Indian Rupees.

Contracts LTP. Classroom gyaan: The road ahead for currency futures mkt. How bankers view the currency futures trade in India. The classroom gyaan on mkt dynamics of currency futures. Classroom: Currency Derivatives. Forex Trading for Beginners What the brokers don't tell you.

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