Forex trading or foreign exchange is the global marketplace for exchanging national currencies in international level where all traders exchange their currencies fir profit . Forex trading most widely and actively trading in present time in the world with the individuals , companies and banks in international level . The main aim of forex trading is to gain profit in forex trading you buy a currency at one prince and sell it at higher prices or you also buy it at a lower price and sell a currency at one price.
Forex trading is always traded in pairs like :- USD / INR suppose in which USD is base currency (buy) and INR is quote currency (sell ) . So , in currency pairs the value of one currency is based on the other which establishes how much a country can purchase the currency of another country and to build this price connection in the global market is the main goal of the Forex trading. But it’s all depends on the government’s of the country’s because the government decide how they have to define their currencies value .
Types of Currencies
There are two types of currencies defined by government:
first is free – float currency in which exchange rate determined by demand and supply . For example:- US “dollar” & Indian “rupees”.
Second is fixed – float currency in which Exchange rate set firmly by government authority of our country. For example:- Saudi “Riyal” & Panamanian “Balboa”.
The Forex trading includes the participants of Retail traders who are widely used for forex trading for their personal growth in this they trade their own money for profit , financial institutions of the country who gives loans to the citizens , commercial banks and Hedge funds who make to manage their statigies to borrow money and make profit to exchange their currencies and the last activily participants is central government of the countries who engage in forex trading.
Why forex Trading?
Forex trading is one of the widely used trading in the world because it consists more benefits than other trading and it is easy to use. The first benefit of forex trading is the Indian trading open for only 6 to 7 hours in a day and when Indian trading is closed so we have to wait for the entire next day to start trading but in forex trade we are not waiting to start trading because forex trading open for 24 hours in which their is no time limit. And we have the greatest benefit of forex trading if you are a scholar or whether you are a company manager you are free to start this trade after doing your work.
You also start trading in night or a day to 3 to 4 hours and make profit to exchange their currencies and in forex trade their is no problem of gap up , gap down , in bank nifty and stocks. simply you only do trade just add the stop loss and target and forget about the loss. Hence , forex trading is a good and excellencent process to generate extra income.
Laws Related to Trading in India
Firstly we know that trading is illegal in India. legal for RBI (Reserve Bank of India ) & SEBI ( Securities and exchange board of India ). But we also start trading in India suppose one company named exness India who trade with different companies with their global account both deposit and withdrawals like Thailand and Malaysia but in India same company make new company and trade with India to show different business approach. So, the Indians also start legally trade in India with third party companies.
There are some steps to do forex trade :-
1} To collect information and knowledge about forex trading.
2} Get reliable and fast internet connectivity to start trading.
3} It is important to find a Licensed forex broker.
4} Create a forex account.
5} Add currencies/ funds to your trading account.
6} And lastly , start trading.
How Forex Trade is Operated?
Forex trading is the global marketplace for exchanging currencies at the international level. so, it is based on supply and demand it is simple to start entering the credit side of the BOP (balance of payment) account.
It is simple to understand when payment made in foreign exchange it is debited from BOP account. and when payment received in foreign exchange it is credited from BOP account. Overall the surplus of BOP account showing that the currency of the country is strong and the deficit of the BOP account is showing that the currency of the country is weak.
And this all also shows that the one country currency value is greater or less than other country’s currencies.
Different Categories of Forex Trading
1) Spot Market/trading
In this market or trading the traders do on the spot settlement. The currency exchange in current price with immediate exchange.
2) Forward Market/trading
In this market or trading the traders trade in regular bases and trading through currency exchange and in this buyers and sellers set the price in specific date and time to exchange currencies.
3) Future Market/Trading
In this the traders are unregulated and in this no real exchange of currencies between traders. It is also follow similar process like forward trading in which buyers and sellers set the price in specific date and time to exchange currencies.
All three categories are good and excellence for trading. but spot market widely used by the traders.
Benefits of Forex Market Trading
There are major benefits of forex trading. First is there is no involvement of central authority and any other organisations. And for forex trading there is no rule and regulations to exchange national currencies globally. And second benefit of forex trading is there is no fees or any type of commission to be paid . The third benefit of forex trading is it is operated 24 × 7 so, it is also flexible in time. and last one is high leverage and liquidity.
Drawbacks of Forex Trading
1)High risk – Firstly we know that in any type of trading consists high risk of loss. because we don’t know that the currencies we want to exchange give profit or loss. So their is high risk for traders . No one takes risk – free guarantee.
2) High leverage – we show that forex traders can increase their profits by using leverages but simultaneously, the number of their losses also increase in the same proportion.
3) Risk of higher loss – In trading there are many traders who don’t know about how to forex trade but they start trading so there are higher chances they have risk of higher loss.
4) Lack of transparency – There is limit control on your trade. No one discuss about that situation or trading.
5) low residual return – Residual return is the portion of a return on an investment that cannot be accounted for by its market returns.
Conclusion
At last we say that the forex trading is safe trading and widely used trading in the world. In this participant actively participated and get profit. It is good trading for who are engaged in their studies like a scholar and a manager who go to their office and also a housewife who wants to trade to get profit. But they all engage in their work full day so they have opportunity to start trading at night because of flexible trading time (24×7).
It is one of the best platforms for beginner who want to start trading and exchange national currencies globally.it is easy to use. Hence, forex trading is a good and excellent process, to generate extra income.
