A forex account is one that holds deposits in one or more currencies for trading.
These trades are based on the movement of the foreign exchange market. With this
type of account, you can now unlock vast and potentially significant returns from
global markets. These and other factors draw investors to forex trading.
FOREX, the word is a portmanteau, a blend of the words foreign currency and exchange,
and self-explanatory. In FOREX, you trade in the currency market, which is the largest
market in the world. The daily estimated trading volume is USD 6 trillion, spread
over different hotspots around the world and remains active for 24 hours.
FOREX trading is unlike the stock or commodity market. In FOREX, traders trade currency
pairs in the direction of the market. Unlike buying stocks, when you trade in currencies,
you are simultaneously buying one currency and selling the other. And, you don’t
need a DEMAT account for currency trading, as there is no delivery of currency involved.
Most trades in the currency market are cash-settled. For online FOREX trading, you
only need a currency trading account.
If you are wondering, forex trading can add diversity to your portfolio and let
your investment exercise better. The market remains open for 24*7 involves a variety
of players from government, banks, institutional investors, travellers, corporations,
and amateur traders.
However, the forex market is decentralised. The market operates in different locations
like London, Singapore, Tokyo, or New York. To participate in the market abroad,
you would need a broker with an international reach.
In India, you can trade in forex derivatives in the BSE and NSE exchanges. However,
the market is highly regulated, and trading in non-INR currencies is prohibited
under FEMA rules. Before you start trading, go through the rules and guidelines
released by the RBI regarding FOREX trading in India, so you don’t end up at the
wrong side of the law.
To trade in foreign currencies, you will have to start by opening a currency trading
account. Here are the steps involved in that,
The FOREX market behaves differently from the others, and hence, you will have to
develop a sense of trading in the currency market