Foreign exchange trading or also known as forex trading, has become more liberalized for the small investors in India. With the world economy being an open economy, it is now common to find numerous individuals wanting to expand on their business by entering the foreign exchange market. However, getting into this competitive environment means that one needs to take some time and get prepared. This article wishes to give a full insight to smart investors interested in opening trading accounts for currency trading account without any disbelief.
Please beware that what really makes currency trading all the rage is not only the single point gain but the creation of a solid money making strategy. Therefore, it is about time that we begin this process, to make everyone smart, confident currency traders in the Indian market.
- Understanding Forex Trading Basics
Forex trading is the procedure of acquiring one country’s currency using the currency of another country is called as Foreign exchange trading. Unlike doing business in equities like the stock exchange, in forex trading you actually trade or exchange currencies in pairs. For example the trade could refer to INR against USD or EUR or such other currency swaps as the case maybe. As for the goal which still has to be reached, it is to gain from changes in the price of one currency relative to another.
In a nutshell, forex trading regards itself as betting on the shifts in currency values in response to the political and economical occurrences. Basically, when you are opening a position you are using your probability to speculate on which way you think that a given currency pair will go. In the event that your forecast is accurate, then you will get the opportunity to earn a profit. But if the market is flowing against your trading position, then you are likely to end up making losses.
- Choosing the Right Forex Broker
One of them can be named the most important one, since it will define whether it is possible to cooperate with the selected broker: regulation status. The only people that should be in operation are brokers who have been licensed by the SEBI and they ought to do so in accordance with the rules set down. This leads to reduction of the brokers’ domination which does not cause the investment or shareholders’ interest.
It is also important to find out if the broker is affiliated to these major stock exchange markets such as the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE). Such memberships suggest that the organizations are to some extent credible and conform to the market norms. Also, consider brokers that hold clients’ funds separately from their own accounts. It means your money is protected from the broker’s operational cash hence gives you an extra layer of security.
- Assessing Trading Costs and Conditions
Unlike other forms of trading where you are exposed to other areas of cost such as commission, subscription fees, platform and software provider cost amongst others, in forex trading the only cost that you are likely to incur is the bid-ask spread which is the cost of buying the base currency and the cost of selling the quoted currency. On the other hand brokers their income base it on this spread in every deal that occurs in the market.
Usually, currency pairs usually come with smaller spreads than other unconventional pairs. Another thing to avoid in the context of comparing the brokers is when looking at the labeled minimum spread. Rather than that, look at the average spread in different situations and particularly during the economic releases that make the spreads much wider.
- Evaluating Customer Support and Educational Resources
Especially in a forex zone where something happens in the blink of an eye, customer support service can mean a lot. Concerns can occur at any given period- right from problems with the trading platform or to queries related with the account, or, even with the execution of trades. One good thing about having a good broker is that most of these problems can be solved in a shorter period hence preventing any loss or any missed opportunity.
It is also crucial to avoid brokers that only provide one or two methods of contacting them, phone, and email, live chat. See what time they are available for support – this ought to be all the time that the forex market is open. Some of the brokers provide support all 24/5 this is for the covering of the entire trading week. Call them with questions when you are conducting your assessments on how receptive they are. Do not only look at the time they answer but also at the quality and relevance of information provided.
- Setting Up Your Trading Account
Opening a forex trading account in India requires documentation and verification by the trading company to meet legal requirements and to curb cases of fraud all over the world. Please, note, that some shops will require identification, depending on the nature of the store and the owner, one may be required to present their identification card or passport and residential permit or utility bill.
Some of the brokers even grant an online verification process through which one can submit scanned copies of the documents or even get the verification done through a video call. Even this is preferred, make sure that the broker employs safe ways of handling your private data.
Another form that you will also have to complete to register an account is the know-your-customer (KYC) form. This form normally comprises questions that aim at determining your financial situation, extent and propensity for risk in trading. Always be truthful to your responses – this information is used to identify the kinds of trading products that could be good for you.
Conclusion
This is true that it is very fascinating while opening a currency trading account or share trading account opening to participate in the global financial markets. That means following this smart investor’s checklist you have built the right base for your forex trading. The thing to bear in mind is that forex trading is not a quick way to get rich but is a method that calls for commitment, consistency and practice.