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10 Things To Know About Currency Trading in India

Everybody knows about stocks and equity trading. But, there is a high-potential market that most people are not aware of. This avenue is called currency trading. Allowing trades to happen with foreign currencies, gives you a chance to profit if you are able to spot the right opportunity and use them for your benefit. Let us understand the basic concepts of currency market trading so that you can take advantage of currency trading in your quest for wealth creation. Read on.

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 like you. 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.e there is no actual delivery of the currency on expiry. When you ask what is currency trading meaning, you are most probably referring to currency futures trading.

Currency futures are traded on platforms offered by exchanges like the NSE, Bombay Stock Exchange (BSE), MCX-SX. Currency trading usually happens from 9.00 am to 5.00 pm. 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. Nirmal Bang is an authorized broker for currency trading on NSE, BSE, and MCX.

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.

For instance, the EUR/USD rate represents the number of US dollar one Euro can buy. If you think the Euro will increase in value against the US dollar, you buy Euros with US dollars.

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.

  • Open a currency trading account with a reputed broker like Nirmal Bang
  • Abide by the Customer KYC (Know Your Customer) norms.
  • Deposit the required margin amount.
  • Get requisite access credentials from your broker to begin.

The currency or forex market is a decentralized worldwide market. Today, it is the world’s largest financial market and has an average daily volume of about $5 trillion. A large currency trades involve the US dollar as one of the currencies in the currency pair.

In Indian exchanges, currency derivatives segment provides trading in derivative instruments like currency futures on 4 currency pairs, cross-currency futures & options on 3 currency pairs (EUR-USD, GBP-USD, and USD-JPY). 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:

  • 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 comes to forex trading in India, and ensure 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 is a sure-shot guarantee and so be prepared to double down or exit when the situation is unfavorable. A good idea about the possible trade scenarios will help you a lot. Keep your losses small.

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. A good way would be to keep a notebook about your trades and see where you went wrong.

George Soros - George Soros rose to international fame in 1992. He is known as the trader who broke the Bank of England. Soros made a profit of $1 billion after short selling $10 billion in British pound sterling (GBP).

Andrew Krieger - Andrew Krieger became famous as a successful trader at Banker's Trust where the company rewarded him by increasing his capital limit to $700 million compared to the standard $50 million limit. He made a lot of profit from the Oct. 19, 1987 crash, also known as Black Monday. He also made money by trading the New Zealand Dollar.

Think you have what it takes to be a famous forex trader? Open a forex trading account with Nirmal Bang today.

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