How to Start Trading in Currency Derivatives in India?
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Author Image LKP - Commodity & Currency Research & Advisory
Commodity | August 09
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How to Start Trading in Currency Derivatives in India?


Stocks and equities trading are well-known concepts. However, the majority of individuals are unaware of a high-potential market. Currency trading is the name for this path. Allowing foreign currency exchanges provides you the potential to earn if you can recognize the appropriate opportunity and exploit it to your advantage. Let''s look at some of the fundamentals of currency market trading so you may use it to your advantage in your quest for wealth.

What is exactly the Currency Market?

Participants from all around the world participate in the international currency market. They trade in a variety of currencies. Various stock broker companies, banks, central banks (for ex. the RBI in India), hedge funds, investment management organizations, retail forex brokers, and personal investors all take part in currency trading. Forex trading and Intraday trading are genuine means of earning money. 

The currency market, often known as the FX market, is a decentralized global market. It is now the world''s largest financial market, with a daily volume of over $5 trillion. The US dollar is frequently used as one of the currencies in big currency exchanges.

Currency Market futures and types of currency markets - 

The currency market, often known as the foreign exchange market (forex market), allows investors to trade currencies. Currency futures contracts are used by investors all over the world to exchange currencies. Currency futures enable investors to purchase or sell a currency at a predetermined price at a future date.

There are two ways or types of currency markets in the world. The first is the spot market, often known as the cash market. The other is the futures market, which trades currency futures. Futures are the main method of trading in the Indian currency market.

How does the Indian Currency market work?

In India, currency futures are settled in cash. This implies that currency trade in India is not physically settled, meaning that the currency is not delivered on expiry. When you inquire about the meaning of currency trading, you are most likely talking to currency futures trading.

The currency derivatives section of Indian exchanges offers trading in derivative products such as currency futures on four currency pairs, cross-currency futures, and options on three currency pairings (EUR-USD, GBP-USD, and USD-JPY). It is highly driven by the supply and demand.

Currency futures are traded on platforms provided by exchanges such as the NSE, BSE, and MCX-SX. Generally, currency trading happens from 9:00 a.m. until 5:00 p.m. To trade in the real currency market, you must first create a forex trading account with a broker. It''s possible that you won''t need to establish a Demat account. 

Basics of Currency Trading

The first thing to understand about currency trading is that it is always a trade between two currencies. Unlike the stock market, where you buy a single company''s stock, currency trading in India is taking a side on a currency pair.

The EUR/USD rate, for example, shows how many US dollars one Euro may purchase. You buy Euros with US dollars if you believe the Euro will appreciate in value versus the US dollar. You sell the Euros back whenever the exchange rate rises, and you cash in the profit.

How to start currency trading?

To begin currency trading in India, follow the steps below. India''s currency market is expanding, and now maybe the best moment to claim your rightful position in it.

  • Open a forex trading account with a reputable broker like LKPSec, which has no account opening fees.

  • Follow the Customer KYC (Know Your Customer) guidelines.

  • Make a deposit for the necessary margin.

  • To begin, obtain the necessary access credentials from your broker.

Things to remember while trading in the Currency market

To be a good currency trader, you must master the fundamentals, set goals, and manage risk. Here are some points of currency market you need to keep in mind:

  • Recognize your trading style - Each currency trader has its own trading approach. This is in line with the risk profile of the trader. Before you start trading on a regular basis, be sure you know who you are.

  • Always choose the proper broker and platform - In currency trading, having a competent broker is critical to success. When it comes to forex trading in India, a reputable broker will hold your hand and keep you informed about current currency market news. Go through the commodity research report for more information.

  • Recognize your limitations. - Define the entry and exit locations for every currency exchange before you begin. Because no transaction is a guaranteed thing, be ready to double down or exit if the scenario becomes negative. A strong understanding of the various trading scenarios would be quite beneficial. Keep your losses to a minimum.

Risks involved in Currency Trading

Keep in mind that forex trading has a significant risk of losing money. There are additional variables when dealing with a currency pair. Risks, however, are inherent in any financial transaction or investment.

Limit your risks while trading the currency market by never trading with borrowed funds and never overextending yourself. These are the only two significant dangers.

There will be times when you have more winning trades and days when you lose more, just as there will be days when you lose more in any kind of trading. Learn from your errors and use what you''ve learned to your future achievements. Keeping a diary about your transactions and seeing where you went wrong is an excellent approach to start.

Some famous Currency Traders

George Soros - George Soros became famous across the world in 1992. He''s remembered as the dealer who brought the Bank of England to its knees. After short-selling $10 billion in British pound sterling, Soros made a $1 billion profit (GBP).

Andrew Krieger - Andrew Krieger rose to prominence as a successful trader at Banker''s Trust, where he was rewarded by having his capital limit increased from $50 million to $700 million. He profited handsomely from the October 19, 1987 stock market meltdown, commonly known as Black Monday. He also profited from currency trading in New Zeal

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