What is Forex Trading?
How to start Forex Trading?
In India, there is only a few percent of the population invest and trades in the Stock Market. The reason may be that they are do not have knowledge about it or it can be anything. Investing and trading in the stock market have become far easier as it was earlier and after the coming of discount brokers in the frame, the scenario has totally changed. So, if we compare the data, the numbers have increased after the discount brokers have come into existence.
If you are investing in the Indian Stock Market, you could have known about Forex Trading and how to trade in forex, if you don't know about Forex Trading then you must read this article about forex trading and how to start Forex trading.
Also read, How to start investing in Stock Market?
What is Forex trading and how does Forex trading works?
One thing that I will tell you is, in forex trading, the risk is very minimum so is the profit. There will be a 2% upside or 1% or 2% downside. This means there is not much risk involved in Forex Market.
The total value of the Fore market is around 5 trillion USD which is more than the transaction that takes place on the NSE and BSE in a month. You can earn huge profits if you have a big amount to invest.
Forex is made with two words i.e Foreign + Exchange, which means exchanging the foreign currency. Buying and selling of Foreign currency are known as forex trading.
{Join our Telegram group for updates on Stock Market, here}
Trading is basically means buying and selling or fixing a price of anything is known as Trading.
So, we can say that Forex Trading is trading in the currencies of other countries in a lot size. The price tends to move upward or downward.
We can earn a good amount of money by doing the technical analysis of the currencies before entering into any trade
Example: A Forex trade example
Let's understand this with an example. Let suppose you buy USD when the price of a dollar was 70 rupee and you buy 100 dollars at 7000 rupees and after few days, the price of 1 dollar reaches 75. So, when you sell these 100 dollars at 75, you will earn Rs.500 profit.
The value of the currency market totally depends on demand and supply.
What is Forex Market?
As you all know, every country has its own currencies like
America - US Dollar (USD)
Europe - European Euro (EURO)
India - Indian Rupee (INR)
Japan - Japanese Yen (JPY)
The American dollar is the most traded currency in the forex and European Euro on the second traded currency across the forex market.
A forex market is a place where you can trade in any currency with the Indian rupee. It means you can buy USD, EURO, GBP with Indian currency.
The price of the currency keeps changing.
How does the Forex Trading works
Forex trading is like the equity trading which we do on our Stock Exchanges (NSE/BSE) through brokers. As we earn in the equity market, we can also earn in the forex market. The price of the currency depends on demand and supply.
Read, How the Stock Market Works?
What do we need to have for forex Trading?
We just need Laptop/Computer or Mobile Device which works well and with active high-speed internet. We need high-speed internet because the price of the currency keeps on changing every second. We can easily transfer money all around the world with the help of the internet.
Best currency for to trade in Forex trading
Here I am providing some Currencies which you can trade in Forex trading,
1) American Dollar - USD
2) European Euro - EUR
3) Japanese Yen- JPY
4) Swiss Franc- CHF
5) Sterling Pound -GBP
USD stands for US DOllar, which means the first two letters denote the country and the last word tells about the currency of the respective country.
I am sharing the list of the currency pairs
1) GBP/USD
2) JPY/USD
3) CHF/USD
4) EUR/USD
In all these pairs, you will see that USD is common among all, this is because the price of other currencies is decided based o the dollar. SO, the dollar is the base currency of all these currencies, and in which the dollar is not the base currency, it is known as the cross-currency pairs.
Also, read What are Sensex and Nifty
How to start Forex trading in India
Lots of people trade/ invest in the Indian Share Market but there are only several people who trade in forex trading. The reason could be that they don't have enough knowledge about forex trading. The big companies and banks trade in forex trading and earn huge profits.
You can earn a good amount of money in forex trading without having enough risk as compared to the equity market. The risk is very much high in the Equity market as compared to forex trading. The reason for less number of persons investing in Forex trading could be that they are not sure whether Forex Trading is legal in India or not. The answer to this question is YES, forex trading is allowed in India. But there are only a few currencies that you can trade in.
The list is mentioned below -
1. USD/INR
2. GBP/INR
3. JPY/INR
4. CHF/INR
So, to trade in forex trading, we must have a trading account in the registered broker from SEBI. After the account opening process, we can start trading on their platform. In India National Stock Exchange (NSE) is the exchange where forex trading takes place. One thing to note is that the forex trading starts Monday to Friday from 9:00 AM to 5:00 PM, which is fixed by the SEBI. But in the International Forex market, it is open 24 hours from Monday to Friday.
How to open an Account for Forex Trading?
To do forex trading, we must have a trading account in the brokerage house that provides forex trading. The broker should be registered with SEBI.
Also, read Who are Brokers in Share Market?
Follow these steps to open an account for Forex Trading
1. Fill the account opening Form
2. Submit Photo ID proof such as PAN Card/Voter's ID Card/ Passport/ Driving Licence/ Aadhar Card
3. Submit Address Proof such as Electricity bill/Ration Card/ Driving Licence/ Aadhar Card
4. Submit FInancial proof like Current ITR, Form 16 (in case you earn salary income), current 1-month salary slip, or Bank statement.
5. Verification. It may be through call or visit (by the representative of the brokerage houses)
After the successful verification of your document, you will get your login credentials. After getting your login credentials, you can start your Forex trading on their platform.
The whole process is Online, generally takes 2-3 days to get you your login credentials.
The key point to note before doing Forex Trading.
To do forex trading, you must have knowledge of the International Forex Market
1. If you do not have enough knowledge about the forex market, you can study it or do a forex trading course.
2. You must know about the technical analysis of the forex market. Technical analysis means studying charts, candlesticks, and indicators.
3. Always follow money management.
4. Try to choose the best broker for forex trading, which is registered by SEBI.
5. One most important thing is EMOTIONS, always control your emotions as in the market there will be ups and downs. So, always control your emotions whether you are making profits or incurring losses.
6. Don't rush for the trade, just wait, watch and then enter into any trade. If the trade is in your zone or fulfilling your criteria, then only enter into it otherwise skip the trade or don't take the trade.
7. Some brokers provide virtual money or demo accounts to learn forex trading. so always, first learn and then trade in the forex market.
8. There is a dialogue in the movie "Scam 1992", "Risk hai to Ishq hai", it means if you are willing to take the risk, you can achieve anything, or if you don't take the risk, you may not achieve anything.
