What is Foreign Exchange Trading?
The FOREX market, also known as the Foreign Exchange Market, is a decentralized global marketplace for foreign currency trading. The FOREX market is an OTC (over-the-counter) market and foreign exchange rates are dictated by it. It also entails selling, purchasing, and exchanging currencies at market rates. In terms of trade rate, the Foreign Exchange Trading is the largest in the world.
> Features of Foreign Exchange Market in India
The following are the characteristics of the foreign exchange market in India:
- Low Transaction Costs
Because of the lower online FOREX trading costs, even small investors will make good money. Unlike other investment options, FOREX traders only charge a small fee. The spread, or the difference between buying and selling prices for a currency pair, is where the FOREX commission is limited.
- Elevated Leverage
In the FOREX market, you can sell on margins, which are technically borrowed funds. The return on your investment is rising exponentially, so the value of your investment is high. Since the FOREX market is so unpredictable, trading with leverage (borrowed money) will result in significant losses if the market goes against you. The foreign currency trading is a two-edged sword. If the market is on your side, you will make a lot of money. If the market goes against your bet, you will lose a lot of money.
- Extremely Transparent
The foreign exchange market in India is a transparent market in which traders have complete access to market data and information necessary for successful transactions. Traders who operate on open markets have more leverage over their investments and can make informed decisions based on the information available.
- FOREX Market Accessibility
If you have an internet connection, you can access your foreign currency trading account from anywhere. You can trade at any time and from any place. Since it is easy for traders to position trade transactions at their leisure, the FOREX market has an advantage over other markets.
> Types Of Foreign Exchange Market in India
The types of foreign exchange markets are as follows:
- Spot Market
In this market, transactions involving currency pairs happen quickly. In the spot market, transactions require immediate payment at the current exchange rate, also known as the 'spot rate.' The traders on the spot market are not exposed to the FOREX market's uncertainty, which increases or lowers the price between trade and agreement.
- Futures Market
Future market transactions, as the name implies, require future payment and distribution at a previously negotiated exchange rate, also known as the future rate. These agreements and transactions are formal, which ensures that the terms of the agreement or transaction are set in stone and cannot be changed. Traders who conduct major FOREX transactions and pursue a consistent return on their assets prefer future market transactions.
- Forward Market
Forward market deals are identical to future market transactions. The main difference is that in a forward market, the parties will negotiate the terms. The terms of the agreement can be negotiated and adapted to the needs of the parties concerned. Flexibility is provided by the forward market.
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