Currency trading or forex trading also known as foreign exchange or FX trading, is the conversion of one (foreign) currency into another (foreign) currency. It is one of the major active trading markets in the world with banks, companies & individuals. It is Currency trading or forex trading also known as foreign exchange or FX trading, it is the conversion of one (foreign) currency into another (foreign) currency. It is one of the major active trading markets in the world with banks, companies & individuals. It’s a bit different from the stock market in stock marketing we buy and sell stocks whereas in currency trading we buy the currency of a foreign market and sell another in the market.
The market of currency trading is much bigger and vast than stock trading. At one place where the market of currency trading is gaining daily profit of around $ 6-7 trillion dollars at the same place, the market of stock trading is revolving around $24-25 billion dollars. The market of stock trading could be bigger than the market of currency trading but the improved traders have increased the value of the market and have also set the goals for traders for their future trading & investments.
Trading of currency is a 24-hour market and is only closed on weekends i.e. evening of Friday to the evening of Sundays but, this 24-hour market concept is misleading and can change the graphs and demographics of the market in just a few minutes. The market of trading is divided into three sessions that include the Asian, United States & European trading sessions. The sessions may overlap and, the main currencies of each of the markets are traded. This means that certain currencies will have more volume during specific sessions or times.
Currency trading is always done in pairs. As in the stock market we sell and buy one stock at a time unlike this we sell one currency and buy another in the forex or foreign market. The most common currencies traded in India are
-British Pound
-Euro
-US dollar
-Japanese Yen
The basic agenda or concept of forex/currency trading is selling a currency at a higher price than the price you have bought it. The difference between both prices is known as Spread in the trading market.
It is important to have full information about the currency trading market before stepping into it, as it involves high risk and could be very uncertain. There is no point in stepping into such a big market without having appropriate and good knowledge about it.
Here is a proper step-by-step guide to start currency trading for beginners. The steps are given below:
- BASIC LEARNING-
It is said that half or incomplete knowledge of anything is always dangerous and when it comes to stock trading or anything similar to that which is highly unpredictable and uncertain it is always better to know it from its roots and how it works. In trading anything risks are always there but with better knowledge and learning we can at least reduce them to their maximum strength. A person should only invest and trade when they know about the things they are trading with, and only after knowing all the pros and cons if you feel that you can handle such high risks, profits, and losses equally then you should start currency trading.
- BROKER–
When you are stepping into a field filled with such highly uncertain moves then, it becomes a really difficult task to work with the same type of energy and predictions every time. To make sure that you don’t waste your money in unnecessary currency and to lower the risk people hire brokers for the same. A currency broker is the person who advises you to invest your money at certain places for better returns and fewer losses. Finding the right person as your broker is difficult and crucial as a currency trader. Traders should look for a licensed broker regulated by the government to provide a platform that is smooth and has reliable trading. While looking for a broker one should also check for the broker offering low fees and low spreads, as it impacts directly on the profits.
- ACCOUNT-
After finding and finalizing an appropriate broker for your trading you should work on opening a trading account by filling out an online application form and attaching the necessary documents with the application form such as KYC documents and Identity & Address Proofs.
These trading accounts are also known as Demat accounts which is an acronym for dematerialization account. After the verification of your documents by a broker, the account will be activated. There are different websites with whom you can open a trading & demat accounts with espresso and many more.
- FUND-
Once your account is activated with all the required and necessary documentation traders have to deposit a certain amount of funds into their account. The amount that has to be deposited in the account depends on the minimum deposit asked by a broker. Some don’t ask for additional funds to be deposited in the account and use the existing fund for stock trading. And if any additional funds are required in any situation for using it with a trading account then it can be used by various payment modes offered by brokers.
- PAIRING CURRENCY–
As already told unlike stock trading, currency trading is done in pairs so, the next step in currency trading is to choose the pairs with whom you want to trade in. For example; if a trader gets a thought that the EUR will strengthen against the JPY, they can buy EUR/JPY. Traders can trade in such pairs as EUR/INR, USD/INR, etc. among many others offered by the exchange board.
- EXECUTION–
Once you have understood all your basics and are done with all other basic steps like account opening, and pairing up your currency, next step includes execution. Traders can execute their trade by placing a selling or buying order. Traders can also make additional settings in their account like stop-loss to take a profit order to lock in profits and to limit their losses.
- MONITORING-
After your trade execution, the next basic yet important step is to monitor your trading and keep a close eye on the trades to adjust your trading strategies when necessary and required.
A trader should keep themselves updated with the market news, events & happenings in the currency markets. This is the reason to prepare a trading plan and stick to it to avoid emotional damage in trading.
Hence this was a step-by-step guide for currency trading to help you with fewer losses and maximum profits. If you still need any help with the same you can look for various website guides like espresso currency trading for beginners and many more. Following these steps will help you make your trade smooth and effortless but still, it is important to keep a close eye on the events of the market and surrounding to make yourself the best in what you do.
