Forex trading is an important part of the global financial market, which is used for buying and selling currencies. Forex trading in India is allowed only through brokers licensed by SEBI and RBI. You need to have a demat account, trading account and bank account to trade.
What is Forex Trading?
Forex trading is a transaction based on the fluctuations in the exchange rate between two currencies. For example, when trading in the USD-INR pair, you use Indian rupees to buy US dollars.
Factors that influence exchange rates:
| Central bank actions | Changes in interest rates, monetary policies. |
| Exports and imports | If exports increase, the currency strengthens, while imports decrease. |
| Credit rating | Stability in the country’s economy and investor confidence. |
| Economic and political stability | Stability increases the value of the currency, while instability leads to depreciation. |
Forex Derivatives:
Derivatives (futures and options) help traders reduce risk. For example:
| Call option | To take advantage of a rising currency price. |
| Put option | To take advantage of a falling currency price. |
Types of Forex Trading:
| Spot trading: Trading currencies for immediate delivery. |
| Forwards and Futures: Trading at a specific price in the future. |
| Options trading: Reserving the option to trade at a specific price. |
Features of Forex Trading in India:
- Currency pairs: USD-INR, EUR-INR, JPY-INR, GBP-INR.
- Cross currency trading: EUR-USD, GBP-USD, USD-JPY.
- Regulation: By SEBI and RBI.
How to make profit in Forex trading?
Buying or selling by predicting the fluctuations in the price of a currency.
| Example: If USD/INR is at 79 and the value of USD increases to 80, you can make a profit by selling the USD you bought. |
Key steps to start trading:
| Choosing a reliable broker: Deal with SEBI-registered brokers. |
| Education: Learn technical and fundamental analysis of the Forex market. |
| Risk Management: Set a fixed risk limit for each trade. |
Making informed decisions and adopting the right strategies is key to making a profit in Forex trading. You can start trading on Angel One or other SEBI-approved platforms.
