India Forex trading has always been a bit of a mystery to anyone wanting to know more about it. From being something that has attracted more interest in the recent years, forex trade has grown from being a fundamental concept to an evolved area of investment.
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The subject of forex trade has many misconceptions about it. It was previously thought to be the domain of corporate and financial institutions. But that is hardly a fact. Forex trading is as much an individual enterprise activity as with banks.
Forex trading is not complicated. Even though initially the numbers may look intimidating, the process of investing through foreign exchange trading is simple. So much so that forex trading is one of the simplest ways to make money.
Like any other investment in the markets, forex trading does come with risks. You have to master the basics even before thinking of advancing to more serious forex trading.
The basics of forex trading for beginners
A forex market is a place where trading of currencies takes place. Alternatively, a forex market is known as currency market. The forex market is a place where buying and selling of foreign exchange happens between many currencies. Such buying and selling is the infrastructure of international finance.
The main parties involved in forex trade are the banks. For instance, if India has to import raw materials from the U.S. it has to pay the U.S exporters in dollars. For this it has to convert the Rupee into Dollars.
This conversion is a perennial thing and happens at all times during the day. The U.S. dollar is pegged at four trillion dollars a day worth of transaction conversions.
Now if you are an individual trying to get into forex trade, you are simply an actor in the above-mentioned process of buying and selling currency to facilitate trade. You will not own a trillion of currency, but with whatever money you have, you buy currencies.
You buy through a pairing financial mechanism. In this process, when you purchase a particular currency (For e.g. the Canadian Dollar), it is exchanged with another currency (for e.g. the Japanese Yen). This is known as pairing.
So here you trade with pairs. You buy pairs and sell them. Just like you trade with shares on the stock market, here you trade with pairs. This is the fundamental difference.
Understanding the dissimilarities between forex trading and stock trading
If you are confused between stock trading and forex trading, the following information will help you get more perspective.
- The stock market is a place that has a huge list of companies and their stocks. But with the forex market, you are only concerned with leading currencies. You do not trade with currencies that are not used extensively in the world. This means that you trade in currencies of economically strong countries.
- The stock market does not operate throughout the day. It is active only for a couple of hours during the day. A forex market is active throughout the day.
- Margin trading is high in forex trading. You get significant margins when you sell your pairs. And this exposes you to buying probabilities of more pairs.
- Unlike the stock market, even a small change in the value of currency can affect your pair value in currency market trading.
How to begin
Open an account with any online forex trading agencies. Deposit money to your account and start trading. Before starting to invest, learn the art of trading. Start off with practice accounts to give you more hands-on experience. Most online trading accounts give you access to practice accounts to perfect your art of online forex trading.