What is Forex Trading and How to Trade FX?

Posted by Saurabh Chaurasia on

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What is Forex Trading?

Forex trading is a financial transaction between buyers and sellers, who transfer currency amongst each other at an agreeable price. It is a transaction in which individuals, companies and central banks convert one currency into another. If you have traveled abroad, you must have made a forex transaction. The majority of currency conversion is undertaken to earn huge profits. Currency converted every day can make price movements of some currencies dynamic. It is this volatility that makes the forex market extremely attractive to traders.  Forex market activities can be segregated under 2 categories namely, Spot transactions and Forward transactions.

How to Trade Forex?

In India, as per extant RBI guidelines, spot transactions are not conducted on exchanges, and it takes place between two parties; over-the-counter (OTC) market. One cannot normally trade in this market and the same is only for actual users. However, one can trade in forward market segment which is also undertaken on exchanges in the form of currency derivatives, currency futures and options. You can trade in forex in different ways, but they all work the same way by simultaneously buying one currency while selling another.
Any trader can participate directly in this foreign exchange trading which is easily available online. You can earn good returns by using derivatives like CFD trading. CFD enables you to open a position for just a fraction of the full value of the trade. CFD not only analyses your profits but also informs you if the market is moving towards loss. If you want to calculate risk in the forex market, learn to calculate the PIP value as well as Var. PIPs are the units used to measure movement in the forex pair. To educate the investors in Forex, BSE Institute Ltd offers a course on Forex trading. 

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