Investing in Foreign Exchange is becoming more lucrative with every passing day. With growing awareness of the different financial instruments and tools available, trading in currency pairs can be used to great effect. Currency derivatives are often looked at as an excellent asset class that is perfect for diversification, along with providing other hedging benefits.
If you’re new to the world of Currency Trading, don’t worry, this blog post will educate you on everything you need to know.
15 Things About Currency Trading Online India
Being the single largest investment market in the world, with a whopping $4 trillion transacted on a daily basis, the currency market is the home to a lot of traders looking to trade and generate profits. Currencies are usually traded in two different markets.
- Spot Market / Cash Market – Where you physically buy/sell currencies for cash.
- Derivatives Market – The most common avenue for Currency trading in India. This is the most common method utilized to trade in currency pairs in our country.
Currency trading happens through financial instruments called derivatives. Derivatives are contracts that allow users to purchase/sell the underlying asset (in this case, currencies), at an agreed upon date and price.
Furthermore, these derivatives can be classified into two categories – Futures, and Options. While a futures contract gives the holder the obligation to purchase/sell the underlying asset at the agreed upon price, an options contract gives the holder the choice to purchase/sell the underlying asset at the agreed upon price.
Most participants in this market are speculators. They don’t actually take delivery of the currency, but rather settle the transaction before the expiry date. Usually, participants tend to gain/lose money based on the prices of the futures/options contract. In the industry, this type of transaction is called “cash-settled” transactions.
Is Currency Market truly Open 24/7?
Yes, and no. The currency markets usually operate in different sessions – European Session, Asian Session and the United States Trading session. There are a few overlaps between the three sessions, but the main currencies of the different countries are only traded during the active hours of their respective sessions.
For instance, currency pairs based on the GBP will have more volume during the European session, while currency pairs involving the USD will be more actively available during the United States Trading session.
Now that you have a solid understanding of what derivatives mean, it is time to look at the most important aspect of currency trading – the currency pair.
In a foreign exchange market, a currency pair can be defined as the price of one currency, as quoted against the other currency. There are two components to a currency pair – the base currency and the quote currency.
Base Currency – The first currency that appears in the currency pair quotation.
Quote Currency – The second currency that appears in the currency pair quotation.
Let’s take a GBP/INR pair for instance, which is quoted at say, 102.
In this instance, GBP – Base currency, INR – Quote Currency. The number 102 refers to the units of the quote currency that is required to purchase a single unit of the base currency.
In this instance, the quote should be read as, 102 INR is required to buy 1 GBP.
Usually, each currency in a currency pair will be referred to by their ISO abbreviations, where the first two letters represent the country, and the last letter describes the currency.
Why Is Currency Trading So Predominant?
The $4 trillion transaction value in the foreign exchange markets surely make you wonder “why is currency trading extremely lucrative?”. With the rapid advancements in technology and infrastructure, importing and exporting of goods and services have become common. These import/export transactions usually take several days to complete, during which time they will be exposed to fluctuations in the currency values.
Importers/exporters use these currency derivatives to help them hedge against these risks – one of the many benefits of currency trading in India. In other words, they put out futures contracts that would enable them to sell their currencies at a fixed price, after the whole transaction is completed.
This creates opportunities for traders who can spot a good deal. If the currency increases in value in the meanwhile, the traders can pocket the increase, which, in many’s eyes, is worth the risk taken.
Who Are the Major Players in the Currency Trading Market?
Traditionally, the currency market was dominated by institutional investors and import/export companies hedging their bets against currency volatility. The Central banks of different countries, (The Reserve Bank of India, in our case) tend to exert influence from time to time, to uphold the value of their respective currencies.
However, with the rapid growth of internet technologies, and growth of leading brokerage platforms like Goodwill, retail interest has significantly increased in the currency market.
Do I Need To Open A Demat Account For Currency Trading in India?
Demat Account is used only when you take actual delivery of the assets involved. In India, since the Foreign Exchange trades are cash settled – i.e, there is no physical delivery of the associated currency, there is no need for you to open a Demat account. However, a trading account is required to execute all your currency trades.
However, if currency trading is just one of your many avenues of generating wealth, you should perhaps consider opening a Demat account nonetheless. While there are many platforms that you can consider, Goodwill is hands down the best platform that you can choose to open free demat and trading accounts online.
How to Open Currency Trading Account Online
Opening a currency trading account online is effortless with Goodwill. Fill out your KYC here, and wait for us to do the rest!
Step 1: Enter The Required Personal Details.
Step 2: Fill Pan no, Date of Birth, Aadhar Number and the other required details.
Step 3: Fill Communication Address.
Step 4: Upload the necessary Documents
Step 4.5: Documents that you’ll need – PAN card, Passport Size Photograph, Aadhar Card, Latest Salary Slip/Latest ITR/Bank Statement going back six months.
Step 5: E-Sign and complete the KYC process – Your account will be open for trading shortly.
That’s it, 5 simple steps, and you’re well within your journey to invest in the top currencies in India.
Why Should I Open An Account With Goodwill
We understand, you’re sceptical about us as the self-proclaimed “best currency trading broker in India”. But we assure you, our clients call us that only because of the 100% satisfaction that we’re able to provide them with our services. Take a quick sneak peek at some of the services we offer:
The Goodwill Advantage:
- Goodwill makes it super simple for you to open an account and begin trading. 5 simple steps, and you’re all set to begin trading.
- Expert guidance to help enrich your knowledge – in best investment and trading practices.
- The currency market is open 24/7 – so is our platform. You can trade at your fingertips with Goodwill’s Next Gen Trading App – GIGA. Get access to the state of the art web trading platform, and desktop app, along with GIGA, all with your free Demat and Trading account.
- Don’t have access to the internet? don’t worry, take advantage of our call and trade facility to truly stay connected to the markets.
- Hassle-free, timely support guaranteed to all Goodwill clients.
- Option to trade in currency futures, currency options to inter-currency trading.
- Flexibility to trade across all exchanges – MCXSX-CD & BSE-CD
- No Separate Investments Required – Make use of our single margin account. Utilize margins and collaterals across Equity, Futures and Options, and Currency Segments.
Oh, did we mention the advanced trading and charting tools that come with the Goodwill account? Go ahead, give us a try, and see if you don’t believe we’re the best currency trading platform online in India.
How to do Currency Trading In India?
Once you’ve opened your Forex Trading account, you’re required to deposit a margin account that will be utilized to make trades. Once Goodwill completes the verification of your KYC, we will share with you the credentials for your trading account. There are multiple methods and strategies that are involved in trading currency pairs. Learning how to make, say, daily Fibonacci pivot trades can take quite some time and effort to understand truly and grasp the concepts.
Amateur traders in the Forex market usually start with Scalping – where retail traders attempt to make multiple small trades (with multiple small profits through the day). Another strategy which is popularly employed is called the positional trading strategy, which again, might take a while to understand, and employ to generate profits consistently.
Where do I learn Currency Trading Strategies?
For you to pick out the top currency pairs for trading in India consistently, it is necessary that you develop a trading system based on some of the popular trading strategies. As mentioned in the previous segment, different trading strategies vary in complexity, and the time taken to learn, and a good training resource can go a long way in helping you make your trades successfully. Goodwill offers training programs to all our clients, along with calls and webinars to help you generate wealth.
The Forex market is one of the most profitable markets (definitely the largest) in the world. However, before making trades or investments, make sure you read all the related documents, and understand the associated risks.
What are you waiting for? Open a free Forex Trading account now, and get started with your Forex trading journey.