If you are thinking of investing your money and earning money, then you must have heard the name of forex trading quite often. Forex trading means trading in the currencies of another country. Actually, every country has its own currency. Their prices change every day in the international market. With the advent of the Internet, this task has become even easier.
Today any person can earn in foreign exchange sitting in any part of the world. In today’s article we will talk about forex trading. Actually, in today’s time many people are earning through this type of trading. The reason behind this is that this work can be done only through a registered forex broker.
What is Forex Trading?
Forex means foreign exchange. That is, forex trading means trading various foreign currencies. Under this process, trading takes place in the currencies of different countries due to their fluctuating value. Let’s say you want to deal with a British company, you will need the currency of that country to make the payment.
Now to pay that company, you have to make the payment in pounds. Now to make payment to the company, first of all you have to exchange Rupees in Pounds. This is where the need for a forex trader comes in. With the help of forex trading, you can convert your rupees into pounds.
Foreign currency is sold and exchanged through trading. In simple words, the trading of forex is called forex trading.
How does forex trading work?
Forex trading is similar to equity trading. In equity trading, the value of the share plays a decisive role in earning or loss. Whereas in forex, the exchange price plays a decisive role. One can buy any currency as per his requirement and knowledge to earn from forex trading.
Suppose today the price of one dollar is 73 rupees in Indian currency. A forex trader expects that the dollar will rise from Rs 73 to Rs 75 in the coming 2 months. So he buys $1000. If his guess turns out to be correct, then after 2 months he will make a profit of 2000 rupees on thousand dollars. At that time, when the trader sells thousand dollars, he will get a price of 75 rupees per dollar.
How to start forex trading
Very few people use forex trading in India. Actually, this trading requires a large investment. The second reason is also that people consider it illegal in India. By the way, let us tell you that this kind of trading is not illegal, but the Reserve Bank of India has set many terms and conditions for this.
For forex trading, the broker must have a SEBI registered broker account. Without this you will not be able to do trading. If you are also thinking of trading, then first you have to become a SEBI registered broker, for which you can go to SEBI website.
Legally, Forex is allowed by some Indian Exchanges, BSE, NSE, MCX-SX (Multi Commodity Exchange) etc. To trade forex, one needs to open an account with a registered forex broker. Through this account a person can do forex trading.
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Rules in India
As we told you earlier that in India SEBI and Reserve Bank of India have established some rules regarding Forex trading. Let’s understand the Forex Trading Management Act for Currency Trading in India.
Forex trading in India is legal only with SBI approved and registered Brokers.
Presently there are 3 recognized exchanges in India – National Stock Exchange (NSE), Metropolitan Stock Exchange of India (MSE) and United Stock Exchange (USE).
The only currency accepted for futures trading was the INR/USD pair. Later on, more pairs were added for trading. Currently, trading in derivatives of Dollar, British Pound, Euro and Japanese Yen is permitted in India.
Currency options are available for trading the underlying in the form of the USD/INR spot rate.
The lot size for futures is 1000 per unit except in JPY/INR pair where lot size is 100000 per unit.
All contracts should be settled in cash only and that too in Indian Rupees.
For forex trading, an initial margin is required which is deposited in the exchange through a financial intermediary as derivatives trades take place on margin.
The margin is generally 5% of the contract value. However, the bank may change the margin depending on the volatility in the market.
Currency trading with a registered broker is legal, but trading with an international broker and depositing money from an Indian account into a foreign account without the consent of the Indian authorities is against the law.
Some tips for Forex trading
If you want to be successful in forex trading, then today we are going to give some tips, through which you can be successful. Let us tell here that these tips have been suggested by experts.
- Before trading forex, get proper market knowledge and sufficient experience.
- The forex markets around the world are open 24 hours a day, five days a week, but the Indian market closes at 5 pm. So one should opt for intraday.
- One needs to beware of scams while trading. Trade only through a registered forex broker.
- Set a stop loss for each trade, otherwise it may fail.
- Make an outline of the work before trading and always follow it.
- Always keep your emotions separate from trading, as emotions often lead to impractical decisions.
- Never trade to cover your losses. Rather trade only when you think it is right for you.
In forex trading you need to do your own analysis with discipline. This requires a good understanding of forex analysis charts and technical tools. It also helps to chart and focus on your own trading plan. Check out for more Business Articles here.