The most successful forex traders constantly preach the importance of careful risk management. Therefore, forex traders closely monitor macroeconomic factors such as interest rates, employment, and GDP growth rate.

All forex traders track major economic data, but the vast majority are technical traders, trading on an intraday or other short-term timeframe.

Many popular technical indicators used in all financial markets were originally developed for trading the forex market. Key requirements for day trading forex include a relatively high risk tolerance, the ability to manage multiple orders in a fast-moving market, and being a highly skilled technical analyst. The process of finding a good, reputable options broker is relatively easy.

Any stock brokerage firm also offers option trading. If you already have a retail stock trading account, then you may be perfectly happy using your current broker. For forex traders, the process of finding and choosing a good broker is significantly more complicated due to the following factors:. You can make a fortune trading forex. Most traders who try their hand at currency trading end up walking away with a substantially lighter wallet. If you want to become a winning forex trader, first, arm yourself with good sources of market information.

Websites such as fxstreet. com offer real-time market news and price data, opinions of numerous market analysts, trade ideas, strategies, and education on the use of various technical indicators. Being a successful technical trader requires much more than just knowing how to apply technical indicators to a price chart. Only diligent practice will enable you to master technical analysis and develop a high level of skill in interpreting price action.

Trading psychology is perhaps more important in forex than in any other financial market. However, even to just get started in options trading requires becoming familiar with new concepts such as strike prices, option premiums, intrinsic and extrinsic value, and implied volatility — just to name a few.

In addition, there are advanced option trading strategies such as writing options and using options to hedge an existing position in the underlying stock.

Forex and stock options are two markedly different asset classes. Determining which trading market is the best bet for you requires consideration of several factors. For one, what investment arena do you want access to? The higher amount of leverage available in forex trading makes it particularly appealing to traders with limited trading capital, who are looking to use a little money to make a lot of money fast.

Trading the hour-a-day forex market is likely to require a larger time commitment. The options trading market is a more comfortable fit for longer-term investors who are already familiar with stock trading. However, some investors may find the limited liquidity in some options frustrating.

Ultimately, your decision will probably be determined by which market more closely aligns with your investing and overall financial goals, risk tolerance, and personal trading style. About the author : Alexander is the founder of daytradingz. com and has 20 years of experience in the financial markets.

He aims to make trading and investing easy to understand for everybody, and has been quoted on Benzinga, Business Insider and GOBankingRates. Forex vs Options Forex trading and trading stock options are two leveraged forms of investing. Table of Contents. There are 3 types of currency pairs. A point in price or pip is the smallest movement change in the valuations of the currency pair.

In a currency pair, the currency on the left is base currency and the currency on the right is quote currency. The price for buying the base currency is called Bid price and the price for selling the base currency is called Ask price. The difference between the bid and ask price is known as a spread. An important concept in forex trading is leverage. Leverage allows a trader to trade with more than what they have in cash.

For example, if you have Rs 10, in your trading account and your broker gives you leverage then you can trade in currencies up to Rs 2 Lakhs. A leverage of will allow you to trade up to Rs 5 lakhs against Rs 10, in your trading account. Contrary to shares, currencies are traded in lots. There are 3 lot sizes namely, Micro lot 1, units ; Mini Lot 10, units and Standard Lot 1,00, units. Now that you understand the basics of the currency markets in India, let us look at the primary advantages and disadvantages of currency trading in India.

Any person can open a currency trading account as there is no minimum capital requirement. Your broker will provide you leverage, which can go as high as X i. you can take positions up to Rs 10 Lakhs if you have Rs 10, in your currency trading account. Leverage is simply a short-term loan provided by your broker against the amount in your trading account.

With leverages ranging as high as x, a small trader can take major positions in the currency market and earn unlimited profits. Since information on currency movements and interest rates is readily available in the market, there is little possibility of long-term insider price manipulation by central banks or market participants.

In currency trading, the spread i. difference between the bid price and ask price is the income for brokers. With factors such as a hour market, high leverage, and a daily turnover of 6. Also the currency market is more based on technical analysis rather than fundamental analysis. So, making profits is dependent majorly on your trading strategy rather than market fundamentals.

Currencies fluctuate every second and the fluctuations are drastic during geopolitical tensions or elections. In such times, even a 1 or 2 adverse pip change can lead to huge losses for investors. Also it is very difficult to predict these events hence it is important for traders to understand the market volatility, its factors and its effect before taking huge positions.

While the Indian currency market closes at 5. It becomes difficult for traders to track price movements through different time zones and often they miss out on good opportunities.

Excess of anything can be detrimental to your finances. While big leverages help you take big positions in the market, even a small adverse change can lead to huge losses. Hence it is very important to understand your risk appetite and manage money prudently.

In currency trading, brokers make money via the spread. So, higher the spread, more will be your transaction costs. Traditional brokers charge as high as pips, way higher than the 1 pip charged in interbank trades. Discount brokers, like Samco, charge a flat fee structure. You can read more on the benefits of opening a forex trading account with Samco here. While the currency market in India is jointly regulated by RBI and SEBI, globally the currency market is way less regulated than the stock markets.

The global currency market is dominated by banks and brokers, which can lead to scams, unfair price manipulations, counterparty risks etc. Ram, a teacher in a government school decided to try his luck in currency trading and opened a currency trading account with Samco — one of the best currency brokers in India. He deposited Rs 1,00, in his trading account. Since he has Rs 1,00, in this trading account, based on margin calculations calculate here he could buy 43 lots.

So he took a position worth Rs He decided to sell his 43 lots, making a profit of Rs 22, within a week! Imagine a profit of Rs 22, in 1 week!

But remember, the markets are unpredictable and can move against you at times. So, while you can make money in the forex markets, if your prediction fails, you can also incur losses.

Therefore it is recommended to trade in the forex markets with a strict stop-loss. Forex trading is the act of buying and selling currency pairs to profit from a change in their exchange rates.

To successfully make money via forex trading in India, you need to correctly predict the exchange rate movements. Apart from this, you need to have a trading account with a SEBI registered currency broker in India, like Samco. In addition to being a SEBI registered currency broker in India, Samco also provides the following facilities in currency trading:.

You can read our detailed article on how to open a forex trading account in just 5 minutes with Samco. So, open the best forex trading account in India with Samco today and start creating wealth with currencies! log in to complete your existing account opening application. Or log in to complete your existing account opening application. Please click here to go to the login page. What is Currency Trading or Forex Trading? How to open a Forex Trading account? How does leverage work in Forex Trading?

The top 10 tips for Forex Trading in India The top Forex Trading strategy What are Currency derivatives? How to start Currency Trading in India? Which is the best Forex Trading platform in India? In this article, we will understand the basics of currency trading in India and address the following questions: » What is Currency Trading and Forex Trading? If you are planning a trip to Paris, to pose beneath the Eiffel Tower, you will exchange your Indian rupees for Euros.

This is known as Forex trading. One of the yummiest potato chips, Pringles, is made outside India and has to be imported.

So, every time you buy Pringles from your Kirana store, you are indirectly participating in Forex trading.

By Deepika Khude Deepika Khude The author is a Certified Financial Planner CFP with 5 years experience in Investment Advisory and Financial Planning. Her strength lies in simplifying complex financial concepts with real life stories and analogies. Her goal is to make common retail investors financially smart and independent. in Last Updated: Mar 25, , PM IST. The average Indian investor has always avoided currency trading or forex trading, assuming it to be a complicated activity reserved only for the rich.

But this is far from the truth, especially since a common man is directly or indirectly involved in currency trading! Currency trading in India is typically done through currency derivatives i. forex spot, forwards and futures contracts. But lack of awareness about what is currency trading or forex trading and how to make money in currency trading has always been a major hurdle for active retail participation in currency trading in India.

In this article, we will understand the basics of currency trading in India and address the following questions:. FOREX, short for For eign Ex change, is a marketplace where national currencies are bought and sold. The forex market is also commonly referred to as FX, currency market or foreign exchange market.

Every individual, from the hedge fund CEO to the Kirana shop owner near you or even you, directly or indirectly participate in currency trading in India. As per the Triennial Survey by the Bank for International Settlements BIS , the daily turnover of the forex market was 6. With such high liquidity comes an unlimited potential for wealth creation and hence it would be foolish to ignore forex as part of your investment portfolio.

But before we learn how to make money in forex trading, let us understand the origin of currency trading worldwide. The earliest references of currency trading dates back to 19th century BCE but the most notable currency trading systems can be traced back to:. In a barter system, commodities are traded against commodities. For example, if Ram has 1 kg rice and he wants to buy 1 kg wheat and Shyam has 1 kg wheat and wants to buy 1 kg rice, then Ram and Shyam will enter into a barter transaction and Ram would get the wheat and Shyam the rice.

But issues like the perishable nature of commodities, non-divisibility etc. broker the barter system. We have all seen movies where the emperors would pay gold coins to their workers Mughal-e-azam or Jodha Akbar and these gold coins were then exchanged for commodities and other services. But again, portability, limited supply and divisibility led to the downfall of gold as a currency.

Post the downfall of the gold coins, economies of the world decided to adopt the gold standard. A gold standard guaranteed that the country's government would redeem any amount of paper currency for its value in gold. So, if RBI printed 1 Lakh notes of 10 Rupees each then it would maintain gold reserves worth Rs 10 Lakhs. And while this system promoted accountability, World War I and World War II broke its backbone when European countries began printing currencies blindly without maintaining their equivalent value in gold.

Post World War II, 44 allied nations assembled and decided to create a fixed international currency exchange rate. Since the United States of America had the most gold, all the currencies were pegged against the US Dollar. This system functioned efficiently until the s.

By , the US faced monetary pressures due to its overseas involvement which resulted in increased government spending and lending. While they printed currency to fulfill the demand, they failed to back it up with equivalent gold reserves.

In , President Richard Nixon ended the Bretton Woods agreement and declared the Dollar to be a fiat currency. The European nations decided to maintain a single currency the Euro which would trade against the US Dollar. Subsequently all the other nations started the free-floating exchange rate determination mechanism against the US Dollar and established the current currency trading system.

In RBI allowed banks to undertake intra-day trading in foreign exchange although they had to maintain a near square position before end of trade. With a global liquidity of 6. Currency trading in India is done via currency derivatives contracts like forwards, futures, options and swaps.

Before we understand how currency derivatives work, let us first understand the basics of currency trading. The currency market has no central location and is an electronically connected network of traders across the globe. The currency market is the only market that stays open 24 hours a day, 5 days a week.

There are 3 types of currency pairs. A point in price or pip is the smallest movement change in the valuations of the currency pair. In a currency pair, the currency on the left is base currency and the currency on the right is quote currency. The price for buying the base currency is called Bid price and the price for selling the base currency is called Ask price. The difference between the bid and ask price is known as a spread.

An important concept in forex trading is leverage. Leverage allows a trader to trade with more than what they have in cash. For example, if you have Rs 10, in your trading account and your broker gives you leverage then you can trade in currencies up to Rs 2 Lakhs.

A leverage of will allow you to trade up to Rs 5 lakhs against Rs 10, in your trading account. Contrary to shares, currencies are traded in lots. There are 3 lot sizes namely, Micro lot 1, units ; Mini Lot 10, units and Standard Lot 1,00, units.

Now that you understand the basics of the currency markets in India, let us look at the primary advantages and disadvantages of currency trading in India. Any person can open a currency trading account as there is no minimum capital requirement.

Your broker will provide you leverage, which can go as high as X i. you can take positions up to Rs 10 Lakhs if you have Rs 10, in your currency trading account. Leverage is simply a short-term loan provided by your broker against the amount in your trading account. With leverages ranging as high as x, a small trader can take major positions in the currency market and earn unlimited profits.

Since information on currency movements and interest rates is readily available in the market, there is little possibility of long-term insider price manipulation by central banks or market participants. In currency trading, the spread i. difference between the bid price and ask price is the income for brokers.

With factors such as a hour market, high leverage, and a daily turnover of 6. Also the currency market is more based on technical analysis rather than fundamental analysis.

So, making profits is dependent majorly on your trading strategy rather than market fundamentals. Currencies fluctuate every second and the fluctuations are drastic during geopolitical tensions or elections. In such times, even a 1 or 2 adverse pip change can lead to huge losses for investors.

Also it is very difficult to predict these events hence it is important for traders to understand the market volatility, its factors and its effect before taking huge positions. While the Indian currency market closes at 5. It becomes difficult for traders to track price movements through different time zones and often they miss out on good opportunities. Excess of anything can be detrimental to your finances.

While big leverages help you take big positions in the market, even a small adverse change can lead to huge losses. Hence it is very important to understand your risk appetite and manage money prudently. In currency trading, brokers make money via the spread. So, higher the spread, more will be your transaction costs. Traditional brokers charge as high as pips, way higher than the 1 pip charged in interbank trades. Discount brokers, like Samco, charge a flat fee structure.

You can read more on the benefits of opening a forex trading account with Samco here. While the currency market in India is jointly regulated by RBI and SEBI, globally the currency market is way less regulated than the stock markets.

The global currency market is dominated by banks and brokers, which can lead to scams, unfair price manipulations, counterparty risks etc.

Ram, a teacher in a government school decided to try his luck in currency trading and opened a currency trading account with Samco — one of the best currency brokers in India. He deposited Rs 1,00, in his trading account. Since he has Rs 1,00, in this trading account, based on margin calculations calculate here he could buy 43 lots. So he took a position worth Rs He decided to sell his 43 lots, making a profit of Rs 22, within a week!

Imagine a profit of Rs 22, in 1 week! But remember, the markets are unpredictable and can move against you at times. So, while you can make money in the forex markets, if your prediction fails, you can also incur losses. Therefore it is recommended to trade in the forex markets with a strict stop-loss. Forex trading is the act of buying and selling currency pairs to profit from a change in their exchange rates.

To successfully make money via forex trading in India, you need to correctly predict the exchange rate movements. Apart from this, you need to have a trading account with a SEBI registered currency broker in India, like Samco.

In addition to being a SEBI registered currency broker in India, Samco also provides the following facilities in currency trading:. You can read our detailed article on how to open a forex trading account in just 5 minutes with Samco. So, open the best forex trading account in India with Samco today and start creating wealth with currencies! log in to complete your existing account opening application. Or log in to complete your existing account opening application.

Please click here to go to the login page. What is Currency Trading or Forex Trading? How to open a Forex Trading account?

العربية English. In this sense, currency exchange means exchanging one currency for another according to the exchange rate at the moment when exchange happens, for example, exchanging US dollar with JOD or vice versa. These financial transactions may also involve trading huge amounts of currencies in the foreign exchange market. By Deepika Khude Deepika Khude The author is a Certified Financial Planner CFP with 5 years experience in Investment Advisory and Financial Planning. Liquidity essentially refers to both how active the market in question is and how easy it is to buy and sell on that market.

Categories:

• Forex
• Forex Brokers
• Binary Options online
• Forex Bitcoin
• Binary Options