Forex trading in india basics

8 Basic Forex Market Concepts.

You don't have to be a daily trader to take advantage of the forex market - every time you travel overseas and exchange your money into a foreign currency, you are participating in the foreign exchange (forex) market. In fact, the forex market is the quiet giant of finance, dwarfing all other capital markets in its world.

Despite this market's overwhelming size, when it comes to trading currencies, the concepts are simple. Let's take a look at some of the basic concepts that all forex investors need to understand.

Tutorial: Popular Forex Currencies.

United States Eurozone (the ones to watch are Germany, France, Italy and Spain) Japan United Kingdom Switzerland Canada Australia New Zealand.

These economies have the largest and most sophisticated financial markets in the world. By strictly focusing on these eight countries, we can take advantage of earning interest income on the most credit-worthy and liquid instruments in the financial markets.

Economic data is released from these countries on an almost daily basis, allowing investors to stay on top of the game when it comes to assessing the health of each country and its economy. (For more insight, see Trading On News Releases .)

Yield and Return.

When you trade in the foreign exchange spot market, you are actually buying and selling two underlying currencies. All currencies are quoted in pairs, because each currency is valued in relation to another. For example, if the EUR/USD pair is quoted as 1.3500 that means it takes $1.35 to purchase one euro.

In every foreign exchange transaction, you are simultaneously buying one currency and selling another. In effect, you are using the proceeds from the currency you sold to purchase the currency you are buying. Furthermore, every currency in the world comes attached with an interest rate set by the central bank of that currency's country. You are obligated to pay the interest on the currency that you have sold, but you also have the privilege of earning interest on the currency that you have bought.

For example, let's look at the New Zealand dollar/Japanese yen pair (NZD/JPY). Let's assume that New Zealand has an interest rate of 8% and that Japan has an interest rate of 0.5% In the currency market, interest rates are calculated in basis points. A basis point is simply 1/100 th of 1%. So, New Zealand rates are 800 basis points and Japanese rates are 50 basis points. If you decide to go long NZD/JPY you will earn 8% in annualized interest, but have to pay 0.5% for a net return of 7.5%, or 750 basis points.

Clearly, leverage should be used judiciously, but even with relatively conservative 10:1 leverage, the 7.5% yield on NZD/JPY pair would translate into a 75% return on an annual basis. So, if you were to hold a 100,000 unit position in NZD/JPY using $5,000 worth of equity, you would earn $9.40 in interest every day. That's $94 dollars in interest after only 10 days, $940 worth of interest after three months, or $3,760 annually. Not too shabby given the fact that the same amount of money would only earn you $250 in a bank savings account (with a rate of 5% interest) after a whole year. The only real edge the bank account provides is that the $250 return would be risk-free. (For more insight, see Forex Leverage: A Double-Edged Sword and Leverage's "Double-Edged Sword" Need Not Cut Deep .)

The use of leverage basically exacerbates any sort of market movements. As easily as it increases profits, it can just as quickly cause large losses. However, these losses can be capped through the use of stops. Furthermore, almost all forex brokers offer the protection of a margin watcher - a piece of software that watches your position 24 hours a day, five days per week and automatically liquidates it once margin requirements are breached. This process insures that your account will never post a negative balance and your risk will be limited to the amount of money in your account. (For more on managing losses, see Money Management Matters .)

Between 2003 and the end of 2004, the AUD/USD currency pair offered a positive yield spread of 2.5%. Although this may seem very small, the return would become 25% with the use of 10:1 leverage. During that same time, the Australian dollar also rallied from 56 cents to close at 80 cents against the U. S. dollar, which represented a 42% appreciation in the currency pair. This means that if you were in this trade - and many hedge funds at the time were - you would have not only earned the positive yield, but you would have also seen tremendous capital gains in your underlying investment.

The carry trade opportunity was also seen in USD/JPY in 2005. Between January and December of that year, the currency rallied from 102 to a high of 121.40 before ending at 117.80. This is equal to an appreciation from low to high of 19%, which was far more attractive than the 2.9% return in the S&P 500 during that same year. In addition, at the time, the interest rate spread between the U. S. dollar and the Japanese yen averaged around 3.25%. Unleveraged, this means that a trader could have earned as much as 22.25% over the course of the year. Introduce 10:1 leverage, and that could be as much as 220% gain.

Carry Trade Success.

In the previous USD/JPY example, between 2005 and 2006 the U. S.Federal Reserve was aggressively raising interest rates from 2.25% in January to 4.25%, an increase of 200 basis points. During that same time, the Bank of Japan sat on its hands and left interest rates at zero. Therefore, the spread between U. S. and Japanese interest rates grew from 2.25% (2.25% - 0%) to 4.25% (4.25% - 0%). This is what we call an expanding interest rate spread.

The bottom line is that you want to pick carry trades that benefit not only from a positive and growing yield, but that also have the potential to appreciate in value. This is important because just as currency appreciation can increase the value of your carry trade earnings, currency depreciation can erase all of your carry trade gains - and then some. ( discuss the Carry Trade Strategy )

Forex trading in india basics pdf.

Market trend Technical analysts believe that prices trend directionally, i. They show that the price behavior of these Hang Seng index composite stocks is easier to understand than that of the index. Ancient[ edit ] Currency trading and exchange first occurred in ancient times. Market data was sent to brokerage houses and to the homes and offices of the most active speculators. Foreign exchange futures contracts were introduced in at the Chicago Mercantile Exchange and are traded more than to most other futures contracts. Japanese candlestick patterns involve patterns of a few days that are within an uptrend or downtrend.

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Basic Forex Trading For Beginner.

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What Is Forex?

Forex refers to the buying and selling of currencies. Forex traders attempt to predict the direction of an exchange rate. Watch to find out more.

Forex refers to the foreign exchange markets and the buying and selling of currencies. Every day an average of more than $3 trillion in transactions takes place in the forex market. Each of these transactions plays a vital role in establishing a currency pair's exchange rate.

When a traveler visits a new country or when an international business pays its foreign employees, they each convert their local currency into foreign currency. Over time these transactions cause a shift in the exchange rate. When money flows into a currency, it strengthens, and when money flows out of a currency, it weakens. These shifts in value are what gives life to the forex market. Forex traders attempt to predict the direction of an exchange rate just like stock traders try to predict the direction of a company's stock price. Forex traders buy a currency pair when they think the exchange rate will increase and sell a currency pair when they think the exchange rate will decrease. And as a global market, they can do this 24 hours a day, five days a week.

FXCM provides traders with cutting edge trading platforms, advanced charting packages, and many other vital trading resources. To try your hand at the forex market, open a free $50,000 practice account today.

Educational Videos: All videos are provided for educational purposes only and clients should not rely on the content or policies as they may differ with regards to the entity that you are trading with. Further, any opinions, analyses, prices, or other information contained on this website is provided for educational purposes, and does not constitute investment advice. FXCM will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

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High Risk Investment Warning: Trading foreign exchange and/or contracts for difference on margin carries a high level of risk, and may not be suitable for all investors. The possibility exists that you could sustain a loss in excess of your deposited funds and therefore, you should not speculate with capital that you cannot afford to lose. Before deciding to trade the products offered by FXCM you should carefully consider your objectives, financial situation, needs and level of experience. You should be aware of all the risks associated with trading on margin. FXCM provides general advice that does not take into account your objectives, financial situation or needs. The content of this Website must not be construed as personal advice. FXCM recommends you seek advice from a separate financial advisor.

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Forex Trading Tutorial for Beginners.

Make Forex Trading Simple.

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What is traded in Forex market? The answer is simple: currencies of various countries. All participants of the market buy one currency and pay another one for it. Each Forex trade is performed by different financial instruments, like currencies, metals, etc. Foreign Exchange market is boundless, with the daily turnover reaching trillions of dollars; transactions are made via Internet within seconds.

What is traded in Forex market? The answer is simple: currencies of various countries. All participants of the market buy one currency and pay another one for it. Each Forex trade is performed by different financial instruments, like currencies, metals, etc. Foreign Exchange market is boundless, with the daily turnover reaching trillions of dollars; transactions are made via Internet within seconds.

Major currencies are quoted against the U. S. dollar (USD). The first currency of the pair is called base currency and the second one - quoted. Currency pairs that do not include USD are called cross-rates.

Forex Market opens wide opportunities for newcomers to learn, communicate, and improve trading skills via the Internet.

This Forex tutorial is intended for providing thorough information about Forex trading and making it easy for the beginners to get involved.

Confirm the theory.

Forex trading Basics for Beginners: Market Participants, Advantages of Forex Market Currency Trading Features: Online forex trading techniques A Sample of Real Trade Analysis Methods Forex Guide: Top 5 Tips to Guide You.

Trading Forex.

Any activity in the financial market, such as trading Forex or analyzing the market requires knowledge and strong base. Anyone who leaves this in the hands of luck or chance, ends up with nothing, because trading online is not about luck, but it is about predicting the market and making right decisions at exact moments. Experienced traders use various methods to make predictions, such as technical indicators and other useful tools.

Any activity in the financial market, such as trading Forex or analyzing the market requires knowledge and strong base. Anyone who leaves this in the hands of luck or chance, ends up with nothing, because trading online is not about luck, but it is about predicting the market and making right decisions at exact moments. Experienced traders use various methods to make predictions, such as technical indicators and other useful tools.

Nevertheless, it is quite difficult for a beginner, because there is a lack of practice. That is why we bring to their attention various materials about the market, trading Forex , technical indicators and so on so as they are able to use them in their future activities.

One of such books is “Make Forex trading simple” which is designed especially for those who have no understanding what the market is about and how to use it for speculations. Here they can find out who are the market participants, when and where everything takes place, check out the main trading instruments and see some trading example for visual memory. Additionally, it includes a section about technical and fundamental analysis, which is an essential trading part and is definitely needed for a good trading strategy.

© IFCMARKETS. CORP. 2006-2017 IFC Markets is a leading broker in the international financial markets which provides online Forex trading services, as well as future, index, stock and commodity CFDs. The company has steadily been working since 2006 serving its customers in 18 languages of 60 countries over the world, in full accordance with international standards of brokerage services.

Risk Warning Notice: Forex and CFD trading in OTC market involves significant risk and losses can exceed your investment.

IFC Markets does not provide services for United States and Japan residents.