10 Main Benefits of Trading In The Currency Market
More commonly known as Forex Trading, Currency Trading is all about investing in currency values to make some profit. Many banks, stock brokers, and financial as well as business institutions practice currency trading in India.
When compared to equities and stocks, Forex Trading in India is not that rampant. Many investors stay away from currency trading due to the restrictions placed by the Reserve Bank of India. Nevertheless, currency trading in India is not as challenging as you think. All that you need to do is use Indian currency as the base currency while trading.
Unlike stock trading, currency trading in India does not require you to open a Demat account. Nevertheless, you will need a Forex trading account with your bank account linked to it. For this, you will have to register with a SEBI-authorized stock-broking website or stockbroker.
Currency trading can be quite risky due to fluctuations in currency prices. Nevertheless, it is still beneficial to practice. Here are some of the top benefits of currency trading in India, you should be aware of:
High liquidity
The Forex Market or Currency Market is regarded as the most liquid financial market in the world. Currencies are bought and sold in large volumes here, without causing much price movement. This increases your chances of carrying out successful transactions. The entire currency market runs electronically with a huge network of banks as well as financial institutions operating round the clock.
High leverage
Leverage is a loan given by a broker to an investor to carry on trading activities. This leverage is quite high when it comes to Forex Trading. So even if you don’t have much money to invest in trading, your chances of generating profit are higher. However, you will have to deposit some amount as a margin, which is usually a certain percentage of the size of your trade.
For instance, In case you are investing INR 1,00,000 in a particular currency pair, at a leverage ratio of 100:1, you will have to deposit INR 1000 as a margin.
The leverage ratios vary depending on the broker and the currency you are trading in. The margin requirement would be high for volatile currencies as compared to stable ones.
High leverage can help you earn substantial profits. But it can also multiply your losses if you are not too careful while trading. Using ‘Stop Loss’ is a good way to minimize your losses.
24×7 market
When compared to stock markets that operate between fixed timings, Forex Trading can be carried out at any time of the day or night. If one market closes, you can always try another market since different markets are operating in multiple time zones. Currency trading in India is open from 9 AM to 5 PM. After that, you can trade in any international currency market, depending on what is open.
Highly accessible
The Forex market is the largest market in the world with daily transactions amounting to $5 trillion. With Forex trading being open 24/7, the market is highly accessible. The low margin requirement as well as the low entry barriers add to this.
Decentralized market
The forex market is international. Many banks and financial institutions across the world are a part of this. When there are so many players, there can’t be any single entity controlling the market or manipulating the prices. There is no particular physical location that the investors have to visit to carry out Forex trading. They can do it over the internet, from the comfort of their homes, and using their preferred devices. Anyone from any part of the world can do Forex Trading, at any point in time.
No special permits
Forex Market is one in which anyone can participate. You don’t need any kind of special training to place your trade. Once you have registered your trading account with a stock broking website and deposited some margin amount, you can start your Forex Trading. However, if you are carrying out currency trading in India, your base currency has to be Indian Rupees. You can carry out cross-currency trading in EUR-USD, GBP-USD, and USD-JPY.
Advanced Technology
It is technological advancements that have made the Forex Market the largest market in the world. Many forex brokers today, have their own proprietary online trading platforms, where people can practice currency trading. By opening a trading account, you can place your Forex orders within just a few seconds, using your smartphone. Most such platforms will supply you with real-time data on worldwide currency movements.
More Opportunities to Make Money
Unlike stock trading, Forex trading allows you to make money even when the market is falling. All that you need to do is correctly speculate the movement of the currency. You can practice with a demo account till you get the hang of it. Also, make sure you register with a full-service broker who will provide you with timely hints and pointers. Understanding the fundamentals of Forex trading should help.
Hedging
You can protect your existing position in the Forex market by hedging. You can hedge by buying or selling a particular pair of currencies, at a particular exchange rate. You can either take an opposite position in the same Forex pair or purchase another Forex option. Nevertheless, it is best to restrain from hedging, if you are too new to the Forex market.
Arbitrage opportunities
Arbitraging is another way to make money in the Forex market. This is all about taking advantage of the minor price differences in the currency rates on different exchanges. Such opportunities may arise when certain news events impact currency exchange rates.
The Bottom Line
Forex trading in India can be very profitable if done the right way. Look up the various Forex Trading websites and compare their features, before registering. If you need any personal loan to carry out currency trading in India, you can try the Piramal Website.