Forex/Currency Trading: A Beginner's Guide | Motilal Oswal
Forex/Currency Trading: A Beginner's Guide | Motilal Oswal

Forex or Currency Trading: A Beginner's Guide

The foreign exchange (Forex) market is the biggest and most liquid market in the world. According to the Bank of International Settlements, the daily trade volume in the forex market is over $5 trillion. You may not know it, but you may have already participated in the forex market by buying imported products or buying foreign currency for travel. Forex trading for beginners can seem complicated. However, the forex market provides numerous investment opportunities.

What is the forex market?

Forex market is an international over-the-counter market with no centralization. Forex trading is done internationally among banks, financial institutions, investors, governments, via connected computer networks. In the forex market, trades take place in currency pairs, for example, INR/USD, EUR/USD, INR/GBP, etc. It is crucial to know how to trade in USD INR Pair Contract in Currency Market.

What is the currency market?

The currency market is the same as the forex market; these terms are used interchangeably. To be able to trade in the currency or forex market in India, you need to open a forex trading account with a broker. A forex trading account will allow you to buy and sell currencies, currency futures, and derivatives.

Currency trading for beginners

Introduction to forex trading is not complex. However, it is a risky market and you must understand the basics well before trading in currencies. The first thing you need is to understand the demand and supply of currencies; every currency has its own risk and rewards, largely depending on the government controlling that currency. You should also have a good understanding of credit and sovereign risk to assess which currencies are good to hold.

Before beginning to trade in you should do your due diligence and decide what kind of risk you are willing to take. You should understand how to effectively hedge currency risk through the exchange. Most currency brokers will give you high leverage, sometimes 1:100, meaning that with little money, you can take huge risks. Some traders become instantly insolvent if things do not go their way.

It is good to look for low spreads and fees from your broker. You should also spend some time studying basic forex strategies. A good starting point is to learn fundamental and technical analysis for currencies. Good knowledge of economic indicators is also important when it comes to forex trading for beginners. One of the best ways to go about it is to open a demo account, a lot of websites allow you to open a demo forex account and trade in points instead of real money.

Conclusion

Until recently, currency trading was only for experienced traders and financial institutions, with more and more brokers offerings services, the market has opened up for retail investments. Currency trading for beginners is fraught with unknown risks. Most beginners tend to lose money in forex markets. However, with the right education, practice, and experience you will learn how to profit in the largest and the most liquid market in the world.

Ready to invest with us?

Share your Mobile Number with us and get started

  • +91|
scrollToTop