Introduction
The Forex market is the largest financial market globally. It is estimated to have a daily turnover of over $6.6 trillion. The Forex industry is comprised of buyers and sellers willing to exchange currencies between each other at an acceptable price. Individuals, global businesses and central banks convert one currency to another by trading the Forex market.
Forex is a short form of Foreign Exchange. This means exchange the currency of one country for that of another country. Therefore, the Forex market is where traders and investors carry out this exchange – it is not a physical place. It is decentralised, meaning it occurs online 24/7. However, although the Forex market is open 24/7, retail traders can only access the market 24/5 between 2.30 AM IST on Monday to 1.30 AM IST on Saturday.
How To Trade Forex for Beginners India?
As a beginner in the Forex market, here are the most important things you must know before you start trading.
1. Learn the Basic Forex Trading Terminologies
Most Forex brokers provide all their traders with free Forex market courses. These educational contents are structured to introduce you to Forex trading and gradually immerses you progressively. They include a glossary of terminologies and instructional videos of how to use the trading platform.
Note that this is one of the most crucial steps and mandatory steps you must take before you start trading. It will ensure that you know what you are doing and not just investing your money blindly.
How to Trade Forex for Beginners India: Terminologies
When you start trading at Forex, you will quickly come across new terms such as pip, lot, and leverage. You must familiarise yourself with these terms since you will encounter them regularly.
- What is Pip?
Pip is the smallest unit with which you can trade in currency trading. For example, for the popular EUR/USD currency pair, this is the fourth place behind the comma. A small example can best illustrate this: suppose the EUR/USD rises from 1.1590 pips to 1.1600 pips. Then the price has risen by ten pips.
But how is it even possible to make money at Forex when you trade with such small units? The answer is that while you trade small units (for example, the fourth decimal place), you do large trade sums of the respective currency.
- What is a Lot?
Lot measures the size of the position you open in the market. It is based on your account currency.
For example, for the EUR/USD, this is USD 100,000. This is 1 lot. For trading, this means that if the price changes by 1 pip, you win or lose 10 US dollars.
| Type of Lot | Size in Account currency | Value |
| Standard Lot | $100,000 | $10 |
| Mini Lot | $10,000 | $1 |
| Micro Lot | $1,000 | $0.1 |
| Nano Lot | $100 | $0.01 |
- What is leverage in Forex?
Well, suppose you want to trade 1 lot in Forex; you don’t necessarily need to have $100,000 in your account. This is where leverage comes in.
Leverage allows you to open a position far greater than the amount of capital you have in your trading account. For example, if your broker offers you a leverage of 1:100, this means that you can open a position that is 100 times the amount of money you have. So, if you only have $1000 in your account and you have a leverage of 1:100, this means that you can open a position worth $100,000 (i.e., $1000 x 100). In this case, you can trade 1 lot instead of just trading 1 micro lot (remember that 1 micro lot is $1000).
As you can imagine, trading 1 lot is significantly more profitable than trading 1 micro lot. This is the benefit of leverage. However, the downside is that leverage also increases the losses you might incur if the market goes against you. This means you shouldn’t use high leverage.
- What is a spread?
This is the difference between the purchase price and the selling price. Again, a brief example: this time we want to buy the Euro/Swiss Franc pair. Suppose the price is currently at 1,2000 pips. For one euro, you get 1.20 Swiss francs. If the spread is now 2 pips, the currency pair will end up at 1,2002 pips. At this point, it is more advantageous for a trader if the spread is as low as possible. The amount of the spread depends on several factors. Of course, the broker plays a decisive role. But the nature of the spread also influences its height. Thus, three types of spreads can be distinguished:
- Fixed Spreads
- Variable Spreads
- Variable spreads with commissions
Fixed spreads are always the same, regardless of the current situation on the market. This is different for Variable spreads; these are usually lower than fixed spreads, but they can expand upwards. This is especially the case before important news is published. That’s why beginners in particular often feel more comfortable with fixed spreads, according to our experience. The third type of spread is also rather uninteresting for beginners: there, you pay an additional fee to the broker for each trade to receive very low variable spreads in return.
2. Practise Trading in a Demo Account
Before you deposit your money and start live Forex trading, always trade in a demo account first. The demo account allows you to practise your trading skill and test your knowledge of the Forex market.
Note that although you will be trading with virtual money in the demo account, the trading environment is the same as the environment you will encounter in the live market. This is the way to familiarise yourself with the trading platform. It is also important to train yourself on chart analysis and different Forex strategies. You can first try to copy working strategies from other traders.
How to Trade Forex for Beginners India: Regulation
It is worth noting that you need to do so through a broker for you to trade in the Forex market.
The Securities and Exchange Board of India (SEBI) is responsible for licensing and regulating Forex brokers in India. SEBI is tasked with ensuring that Forex brokers are compliant to ensure investors and traders operate in a transparent market. It ensures that Forex brokers only certify brokers that FEMA (Foreign Exchange Management Acts) approves.
However, international Forex brokers are not required to be licensed and registered by SEBI to offer Forex trading services to Indian residents. Here are the top three Forex brokers in India:
HotForex
It was founded in 2010 and headquartered in Cyprus. The broker offers over 50 currency pairs and commodities’ CFDs.
IG Markets
This is one of the oldest Forex brokers – it started operations in 1974 and is headquartered in London, UK. It has about 1700 tradable assets, including Forex pairs, cryptocurrencies, stocks, indices, and ETFs.
XM
XM Group was founded in 2009 and is headquartered in Cyprus. The broker offers over 55 currency pairs.
Forex Managed Accounts and Copy Trading
For beginner traders, understanding every aspect of the Forex market can be challenging. And in most cases, beginner traders might lose a lot of their money before they fully understand how to trade. However, this doesn’t need to be the case.
Forex managed trading includes a money manager who trades a Forex account on behalf of a customer for a fee. Managed Forex accounts are similar to the job of an investment adviser to manage a traditional trading account of stocks and bonds. Reimbursements and fees between managed accounts can vary greatly; Therefore, it is important that you fully research your options before assigning your account to a professional administrator.
With Forex copy trading, you will have a lot more control over the trades you make. Here, a professional trader sends you trading signals alerting you when to open and close a particular position. With copy trading, you can automate the trading process by using signal copiers, or you might choose to trade manually.
These managed accounts usually have a minimum deposit to participate in and a fee to compensate for the manager’s efforts. In most cases, money managers typically charge an annual fee, calculated as a percentage of total accumulated funds or assets under management (AUM). This is usually a small fraction of 1-2% of the total. Another type of managed Forex account uses the company’s proprietary trading systems.
We hope you find this article on ‘how to trade for beginners in India?’ useful and informative. If you are from India and willing to get started with Forex trading, consider the brokers listed above as they are credible and offer reliable services in your geography. All the best.