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Overview of Forex Trading in India
Forex Trading, or Foreign exchange trading, refers to converting a currency’s current value for another one, and the price difference determines the profit or otherwise. A forex market is a decentralized marketplace where currencies are traded in the hope of a higher valuation for a future sale.
Transactions among traders for Forex trading are done on the Internet in a market that is open 24/7, with the most prominent financial centers being New York, Paris, Singapore, Frankfurt, Hong Kong, London and Zurich, all of which cover almost every time zone. The forex market starts in Japan and China and ends in the USA every day, thereby making it a very volatile marketplace with prices changing constantly.
- As a consequence, a veteran forex trader has multiple opportunities in a single day to anticipate price movements and can go short and long to capitalize on his expertise.
- In forex trading, a drop in the price of a currency pair means a rise in the valuation of another pair.
- Usually, a forex trader uses leverage to control a larger position with a small capital, which could help them amplify profits.
- The marketplace for forex trading is very liquid, which helps traders enter and exit their positions with ease and maintain tight spreads to protect them from market manipulation.
History of Forex Trading
The process of exchanging one currency for another is age-old, with only the currencies evolving.
- What was once carried by merchants in international trade has today become formalized forex markets.
- A significant evolution of forex trading took place in the 19th century when countries equaled their currencies to a specific amount of gold, and it was accepted as the international standard.
This further changed following the Second World War after the Bretton Woods Agreement in New Hampshire, where it was unanimously decided that all major currencies would be pegged to the U.S. dollar, although currencies could still be converted to gold at a fixed rate. However, US President Richard Nixon ended the Bretton Woods system in 1971, thus bringing in the floating exchange rate system, which ensured that the value of a nation’s currency would be determined by its demand and supply.
- What was once carried by merchants in international trade has today become formalized forex markets.
- A significant evolution of forex trading took place in the 19th century when countries equaled their currencies to a specific amount of gold, and it was accepted as the international standard.
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The last few years have seen enormous technological advancements in online forex trading, with high-frequency trading and algorithmic trading becoming an integral part of it using complex strategies formulated by charting and analysis tools. The current forex market works relentlessly, featuring several currency pairs.
Forex Trading India has significantly increased in size, shape and strength.
Forex CFD Trading | Best Option to Trade Forex Online
Forex trading has evolved in concept and in conception. Forex CFD Trading has become the best option to trade forex online.
- What was once carried by merchants in international trade has today become formalized forex markets.
- A significant evolution of forex trading took place in the 19th century when countries equaled their currencies to a specific amount of gold, and it was accepted as the international standard.
As with other CFD trading instruments, an investor can trade Forex by entering a small margin amount to get into a larger position of investment, through leverage. The total profit incurred during the process, however, will be based on the full amount and not the margin amount. This makes Forex CFD a viable, reliable and profitable option to trade Forex.
How Forex Trading Works?
Foreign exchange trading works on multiple principles that all traders must understand. Below are the five crucial components that encapsulate this trading.
In Forex trading, every pair has two different currencies – the base and quote currency.
- An investor buys or sells the base currency while the trade is done against the quote currency.
- For example, in the USD/INR currency pair, the INR is the base currency that one can buy or sell against the value of the quoted currency, i.e.USD.
The currency pair USD/INR shows the exchange rate between the United States Dollar and the Indian Rupee (INR). For example, if the exchange rate of USD/INR is 75.00, this means 1 US dollar converts to 75 Indian Rupees.
In the forex market, there are two kinds of prices for every currency price: the bid price and the ask price.
- The bid price is the price at which one sells, whereas the ask price is at which a trader buys.
- The difference between the two prices is called spread, which is the profit of the stockbroker.
A trader’s primary objective is to buy at the ask price and sell at the bid price.
What makes Forex trading one of the more popular forms of trading is leverage.
- A trader gets to control a larger position with a small capital.
- However, a trader needs to analyze the use of leverage as it can both amplify profits and losses.
Regardless of that, leverage is the biggest USP in Forex CFD trading.
A trader must know the entities that participate in Forex trading.
- They include the likes of financial institutions, governments, hedge funds, banks and multinational corporations apart from the usual individual retail traders.
- The most significant role, however, is played by the central bank, whose monetary policies and other interventions influence the exchange rates of currencies.
Regardless of that, leverage is the biggest USP in Forex CFD trading.
A trader must use both technical and fundamental analyses to make decisions in the Forex market.
- Technical analysis involves reviewing price charts and other indicators to recognize patterns and trends.
- Fundamental analysis entails staying up-to-date on political, geopolitical, and economic factors that most often influence exchange rates.
Categories of Currency Pairs in Forex Trading
There are three main categories of currency pairs – major, minor and exotic.
Major Pairs to Trade Forex
The major pairs are defined by their liquidity and frequency of trading, such as EUR/USD (Euro/ US Dollar), USD/JPY (US Dollar/ Japanese Yen), and GBP/USD (Great Britain Pound/ US Dollar) are major currency pairs.
They are the most preferred pairs among traders as they have lesser volatility than the other categories.
They are the most preferred pairs among traders as they have lesser volatility than the other categories.
Minor Pairs to Trade Forex
The minor pairs or the cross-currency pairs, are the ones like EUR/GBP (Euro/ Great Britain Pound) and AUD/JPY (Australian Dollar / Japanese Yen).
These have lesser liquidity compared to the major currency pairs and are lesser traded as well.
These have lesser liquidity compared to the major currency pairs and are lesser traded as well.
How profit is made in Forex Trading?
Traders anticipate whether the exchange rate of a currency pair will appreciate or depreciate soon and take a position as per their prediction.
Investors can make profits from two places:
- Either from the exchange rates or
- The difference in interest rates of two currency pairs
Top Forex Currency Pairs to Trade on MintCFD
Here are the top currency pairs available for Forex CFD trading. What makes MintCFD the best Forex Broker for CFD trading is the availability of all these top currency pairs to trade forex.
- These exports contribute a sizable amount to the nation’s GDP, and the Australian dollar could likely decline in value if the global market value of these commodities falls.
- In such a scenario, the US dollar will become stronger, and a trader would require fewer USDs to buy one AUD.
- Inversely, it would take more USD to buy one AUD if the interest rates in America fall.
- The AUD/USD exchange rate is affected by the difference in interest rates between the Reserve Bank of Australia and the US Federal Reserve.
- Though the 10th-ranked economy of Canada doesn't seem to form a major currency pair, the country has the 12th-largest export economy, making its currency significant.
- All major currencies in the forex market are supported by a central bank; for CAD, it is the Bank of Canada.
- The Bank of Canada had last intervened in the nation's currency in 1998 and has since refrained from it.
- The primary exchange of CAD for U.S. dollars happens while paying bills, whether tuition payments, personal shopping, or even transactions back home.
- The biggest USP of CHF/USD is that it is inversely proportional to global economic stress, when its value often rises as Switzerland is financially and politically stable.
- The CHF/USD pair is influenced by economic indicators including employment data, GDP and other such developments.
- The differential interest rate between the Federal Reserve (FED) and the Swiss National Bank (SNB) also influences this currency pair.
- Representing two of the biggest economies in the world, this currency pair has extreme liquidity, resulting in tight spreads - the two most enticing factors for a forex trader.
- There are numerous factors determining the exchange rate of EUR/USD, the foremost of which is the interest rates set by the European Central Bank (ECB) and the US Federal Reserve (Fed).
- Overall, it is one of the most trusted currency pairs as it is less affected by market volatility.
- Yet another popular and frequently-traded currency pair in the forex market, it derives its value from the relative strengths of Great Britain and USA economies.
- The exchange rate of this pair is influenced by the interest rate set by the Bank of England and the Federal Reserve.
- Economic and political developments in either country have been known to affect the exchange pair, apart from the interest rate set by the Reserve Bank of India and the Federal Reserve.
- RBI has been known to intervene in the forex market to manage Indian Rupees’ value from time to time, and traders should be mindful of the same.
- The USD/INR is an attractive pair for hedging against currency risk and it is popular among traders owing to the high volatility and liquidity of the Indian rupee.
3. Create an Account
This is fairly simple. One can sign up with the broker, submit the relevant paperwork, and through the identification verification process demanded by regulatory bodies.
4. Fund Your Account
Before one enters funds in their trading account for a deposit, it is advised to check and fulfil the minimum deposit requirements. Then, pick a sum that feels right.
Forex Trading Calculator
Also known as a pip calculator, a forex calculator is used to determine the value of a price movement in a currency pair. It aids traders in estimating profits, managing risk, and sizing positions by assisting them in calculating the monetary impact of price movements in the forex market.
- A Forex calculator's main output is the "pip," or percentage in points, which is also called "point."
- The lowest possible price change in a currency pair is represented by a pip, which is a defined unit of price movement in foreign exchange trading.
- The size of the position and the particular currency pair being traded determine a pip's value.
Pip’s value can be calculated by the following formula:
Monetary Value of 1 Pip = (Pip Value / Exchange Rate) * Position Size
Things to know in a Forex Trading Calculator
You can use our free Forex Calculator; however, understand the key concepts involved in Forex trading.
Pip Value:
The worth of a single pip changes based on the particular currency pair and the position’s size. A pip is usually equivalent to 0.0001, or 1/100th of a cent, for the majority of significant currency pairs, however, there are some outliers.
Position Size:
The trading position’s size is stated in lots. In forex, a mini lot is 10,000 units, and a micro lot is 1,000 units. A standard lot is usually 100,000 units of the underlying currency.
Exchange Rate:
This is the current exchange rate of the currency pair that a trader is trading.
Example of how Forex is calculated
For instance, if the exchange rate is 1.1000 and you are trading one standard lot (100,000 units) of EUR/USD, the pip value for this deal would be:
Pip Value = (0.0001 / 1.1000) * 100,000 = $9.09
This implies that for a one-lot transaction, your profit or loss would be roughly $9.09 for every pip fluctuation in the EUR/USD pair.
Best Forex Trading App | MintCFD Fx Trading
Our forex trading app offers unique features and is specially designed to provide a user-friendly interface, where users can navigate charting tools, order execution capabilities, real-time market data, and various other features easily to support forex trading activities on the go.
From getting the live streaming of currency exchange rates to various technical indicators, we offer everything that a trader needs on a forex trading app. Apart from ordering various types of orders and monitoring their accounts 24/7, a trader also gets every market update in our app.
Forex Trading Demo
Our platform also provides a simulated forex trading demo account, where one can practice trading and gain experience without risking real money. It can be helpful for both beginners and experienced traders.
Below are the benefits of using our Forex trading demo account:
Register Module includes
Capitalize on currency pair price movements
Trade FX majors, minors, and exotics
with ultra-tight spreads and flexible leverage.
Access your earnings
with no unnecessary delays.
Enjoy fast and precise execution
on trader-favorite platforms like ARK Mobile app, Web Trader and ARK Desktop.
Forex market conditions
The forex market is the largest financial market in the world. With over $5.3 trillion in daily trading volume, currency pair trading presents endless opportunities 24 hours a day, 5 days a week.
Forex trading hours
You can trade forex 24/5 except during server maintenance. We will inform you via email when this takes place.
Spreads
Spreads are always floating. Because of this, the spreads are averaged based on the previous trading day. For live spreads, please refer to the trading platform
Fixed margin requirements
Margin requirements for exotic currency pairs always remain fixed, regardless of the leverage you use. The margin for these instruments is held in accordance with the instruments’ margin requirements and is not affected by the leverage on your account.
Why trade forex market with MintCFD
Take the currency market by storm and trade currencies on award-winning Forex trading platforms with a broker that processes over $2 trillion in monthly trading volume
Stop Out Protection
Trade Forex online with a unique market protection feature that shields your positions against temporary market volatility and delays or avoids stop outs.Low and stable spreads
Trade the forex market with low and predictable trading costs. Enjoy tight spreads that stay stable, even during economic news releases and market events.Fast execution
Capitalize on the frequent price movements of popular currency pairs with ultra-fast execution. Get your FX trading orders executed in milliseconds on all available terminals.
Frequently asked questions
The most popular currency pairs to trade are the ones that offer the most liquidity - i.e. the ones that people trade the most.
These include FX majors like AUDUSD, EURUSD, GBPUSD, CADUSD, CHFUSD and USDINR. These currency trading pairs are all available to trade completely free at MintCFD.
You can see exactly which minors are included in the swap-free program in the instruments table on this page.
Leverage is essentially the ability to place trades with the use of borrowed capital. Your broker gives you a sort of loan to add to your funds, so you can use less of your own money, but still access larger trading positions.
When combined with a solid risk management strategy, leverage in forex can lead to greater returns from FX trading, because it makes capitalizing on smaller price movements more lucrative. But it can also lead to greater losses if you don't combine it with a well-thought-out risk management strategy.
To avoid excess losses and increase your chances of higher returns, make sure you plan your risk strategy and maintain a sensible level of exposure before choosing your preferred leverage option.
Margin in online forex trading is basically the amount of money that you need to open a position. It acts as collateral against any price movements. Forex brokers usually determine this as a percentage of the total position size, based on your chosen leverage.
To open a forex trade online, you need to have enough funds in your account to meet the margin requirement for the trade. You can gain more control over your trades by setting an appropriate margin level that aligns with your overall risk management strategy.