Forex Trading in india,Forex Trading in india

The word Forex is an abbreviation of the English expression FOReign EXchange Operations (international currency transactions). Forex - is an international interbank market rates. The meaning of forex trading (trading) is buying and selling currencies. Since rates of major currencies is constantly changing (floats) through speculative trading profit can be made, for example, by buying the currency at a lower price and later selling it at a higher.

The main participants of the Forex market are central banks, commercial banks and other large financial institutions (they are called market makers). Daily volume of currency transactions in forex are more than 3 trillion dollars, while the average transaction amount are usually about $ 1 million! However, private investors like you and me, too, can participate in this market, with much smaller amounts - through intermediaries (brokers). You can open an account with the company dealing in such profession and can start trading by transferring them a certain amount. After depositing the fund you can trade and earn money.

Since entering the market with small amount it is impossible to earn high returns , but the broker gives you credit or loan for trade, many times greater than the size of your deposit. You can use the loan solely to trade on the market. After completion of the transaction broker takes back it's loan. Usually the size of the loan (leverage) is 100 times the amount of your deposit, that is, you enter in the market with the amount of 100 times the value of the amount you are willing to use for the transaction. Forex trading is usually conducted in lots: 1 lot = $ 100.000. The system works through a brokerage company providing leverage with the insurance deposit, called margin trading ("margin trading").

Each of your forex transaction consists of two parts: First, open a position (buy or sell a certain amount of currency at the current price) and second, closing the position, which is the operation inverse to the one you made when you opened a position. That is, if you are a opening a position, it means you are buying the currency , and when you are closing the position it means you are selling the currency at the new price. After closing the position calculation of profit or loss is done.

The main types of currency in the Forex market are:

• USD - U.S. Dollar
• EUR - Euro
• GBP-Pound
• CHF - Swiss Franc
• JPY - Japanese Yen
• CAD - Canadian Dollar
• AUD - Australian Dollar

All currencies in the Forex market are traded in pairs. In each pair, one currency is the Base, and another is Term or quote. Thus, in the pair EUR / USD, euro is the base currency and USD is the term currency.

The cost of the base currency, expressed in units of quoted currency, called the quotation. Any quotation is two digits. The first figure - Bid - the price at which a client can sell the base currency for quoted, the second - Ask, or Offer - The price at which the client can buy the base currency.

Example: EUR / USD, Bid= 1.2603; Ask=1.2606

Always, Bid < Ask (remember: at any point in exchange for money buying foreign currency bank below the selling price of the currency to a client). The difference between Bid and Ask is called the spread (spread). In the above example, the spread is 3 points. Point (point or pips) - this is the minimum allowed price change. Different currency pairs are quoted with different accuracy, i.e. with different numbers of decimal places in the quotation. Most currencies are traded up to the fourth decimal place (0.0001), except the yen - up to 0.01. The magnitude of spread depends on the currency pair, the transaction amount, as well as on market conditions.

The spread is the primary source of income for a broker: broker companies have their profits primarily from the difference of exchange buying and selling currencies. While choosing a broker, you should definitely consider the amount of spread i.e. if spread is too large - broker is plundering the client, but on the other hand, if it's too little spread it should alert you, because immediately the question arises: if a company deliberately reduces their profits from the spread, what other ways company is going to earn the profit?

Currency transactions in the Forex market are carried out not only to the dollar i.e. why cross rates are used. Cross-rate is the exchange rate between the currencies, which derives from their exchange rate against the dollar. The most commonly used cross-rates: EUR / GBP, EUR / JPY, EUR / CHF.

Transaction in the market takes place as follows: The organization through which you are dealing will provides you a communication channel through which client can perform the operation i.e. He or she can trade. Now a days, special software is used for trading in financial markets, that allow monitoring your transactions and account, and even you can do technical analysis with the help of graphs and can develop your own trading strategies.

Conclusion of the transaction consists of several stages:


- Request quotes
- Obtaining quotations,
- Submission of the order
- Confirmation of the transaction.

When prompted to specify the currency pair of interest and transaction amount. After receiving quotes order can be placed i.e. (order - command) Buy (buy) or Sell (sell) or Out (hang up, nothing). The broker will confirm the deal, after which it cannot be undone.

Entering into the transactions in Forex market can be done in two ways. You can wait until the quote reach the desired value and then order the broker to open or close a position (an instant, or the market, order, market order). Or you can put a pending order for the purchase or sale of a particular currency on a pre-selected rate (of delayed or limit order). In the second case, the broker will automatically execute your order as soon as the quote reach the values stated in the order. This is very useful in the situation when you are not near to your computer but are afraid to miss the important movement of the course.

There are several types of commands but most frequently used commands are Take Profit and Stop Loss. This commands are tied to a specific open position i.e. Take Profit closes the position when the projected profit margins are acquired , Stop Loss also closes a position, when the expected loss is more and client want to protect the deposit from the further growth of losses (up to the loss of deposit).

Now let's consider the example of the foregoing. Suppose, under the terms of broker minimum lot - $ 100 000, leverage - 1:100. You make a deal to purchase (buy) EUR 100 000 per USD at 1.2580. How much do we spend the dollars for this? It determines the course of a given currency pair with your broker. In this case, for 100,000 euros you pay 1.2580 * 100000 = 125,800 dollars. Thus, the minimum deposit, which should be available in your account - 125 800: 100 = $ 1,258.

So you "have entered the market" or "open position". Follow the markets: the exchange rate does not stand still, it changes all the time. If you correctly guessed the direction of the course, and EUR / USD rose 10 points to a mark 1.2590, the closing position, i.e. by selling bought 100,000 euros, you will be able to bail out the already 125,900 U.S. dollars, i.e. $ 100 more! This $ 100 will be added to your account. But! If the rate falls to ten points before the selling price of 1.2570, the closing position, you bail out of 125,700 dollars. Loss of $ 100 will be deducted from your trading account, that is, your deposit "lose weight" to $ 100.