The markets that offer investors the liquidity in the world are forex markets. With convenient ‘round the clock’ access, these markets trade with low costs, but may come with significant setbacks if you are not careful. The Bombay Stock Exchange has links to forex trading, and you can trade here in currency futures. However, pure trading in forex markets comes with certain rules and restrictions in India, with the Rupee as the mandatory base currency you have to trade with. If you wish to earn wealth, or possibly grow your wealth in the ever-dynamic forex markets, you need some pointers to make good returns.
Forex Trading in India Basics
While you may have heard about the Bombay Stock Exchange for easy stock trading, forex trading isn’t as simple as you think. Firstly, you have to acquire some fundamental knowledge which has to do with gaining some know-how of the terms of operation. Also, you must get acclimated to the economic and geo-political variables that influence the currency you choose to trade in. Knowing the following key terms is essential to begin your forex career with:
- Pairs of Currencies - When currencies are being traded, they are done so in ‘pairs’, such as the USD/INR, for instance. The USD is considered a major currency in a pair as it is a robust currency. Therefore, major pairs always use USD in a pair. Certain minor pairs also exist, like the INR/JPY.
- Point in Price - This is also known as ‘PIP’, referring to the difference in the value of the currencies in a pair. For example, in the case the USD/INR price is 74.7001 when markets opened today, and was 74.7003 when markets closed yesterday, the PIP is equal to .0002.
- Base/Quote Currencies - While online forex trading is easy, you will often find terms on forex trading platforms, such as base or quote currencies. The currency that appears on the left side of the sign of a slash (/) is always the base currency. The one on the right is the quote currency. The reference is the base currency, indicating the quote currency amount required to buy a single unit of the base.
The All-Important Forex Broker
Embarking on a voyage of online forex trading may be exciting for any trader, but you must have a good broker with whom you should trade. Your broker must be aligned and comply with any existing regulations of forex markets. You must make sure that the platform you choose for currency trading has a reputation that precedes it. Checking reviews and going through reports online can help you research well. Making sure that your broker is willing to offer you currency pairs that you wish to trade in is another way to zero in on a broker. Knowing about charges beforehand is an additional essential fact you should find out about, as you don’t want to pay your broker heavy charges and obliterate any gains you make in currency trading.
Practice Makes Perfect (Sense)
It's not a good idea to try your hand at forex markets by yourself, and the Bombay Stock Exchange is not a place to start. Rather, it's best if you find a good broker like Motilal Oswal and learn before you trade. Here, besides forex trading, you may learn about other investment avenues like stocks and commodities. You can open a Demat account and begin your investment path. If you are still stuck on the idea of currency trading, you can first try out with some simulation trading at practice sites. Also, you must start with small investments, growing as you learn in a gradual way.
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