• Invest
    Investment Suite
    Stocks
    Mutual Funds
    Future and Options
    IPO
    Exchange Traded Funds
    Commodity
    Stockcase (Stock Baskets)
    Currency
    Non Convertible Debentures
    Sovereign Gold Bond
    Exclusive
    NRI Account
    Private Client Group
    Features
    SipIt
    MTF
    Investment Suite
    Exclusive
    Features
  • Platform
    Product Suite
    Kotak Neo App & Web
    Nest Trading Terminal
    NEO Trade APIs
    Features and Tools
    MTF
    Securities Accepted as Collateral
    Margin Requirements
    Payoff Analyzer
    Calculators
    SIP Calculator
    Lumpsum Calculator
    Brokerage Calculator
    Margin Calculator
    MTF Calculator
    All Calculators
    Product Suite
    Features and Tools
    Calculators
  • Pricing
  • Research
    Research Calls
    Long Term calls
    Short Term calls
    Intraday calls
    Derivatives calls
    Pick of the week
    Top Monthly Picks
    Research Reports
    Fundamental Research Report
    Technical Research Report
    Derivative Research Report
    Research Calls
    Research Reports
  • Market
    Stocks
    Market Movers
    Large Cap
    Mid Cap
    Small Cap
    Indices
    Nifty 50
    Bank Nifty
    FinNifty
    Nifty Midcap India
    VIX
    All Indian Indices
    Mutual Funds
    SBI Mutual Funds
    HDFC Mutual Funds
    Axis Mutual Funds
    ICICI Prudential Mutual Funds
    Nippon India Mutual Funds
    All AMC's
    IPO
    Upcoming IPO
    Current IPO
    Closed IPO
    Recently Listed IPO
    Stocks
    Indices
    Mutual Funds
    IPO
  • Learn
    Resource
    Market Ready
    Kotak Insights
    Infographic
    Podcast
    Webinars
    Youtube Channel
    Quarterly Results
    Investing Guide
    Demat Account
    Trading Account
    Share Market
    Intraday Trading
    IPO
    Mutual Funds
    Commodities
    Currency
    Futures & Options
    Derivatives
    Margin Trading
    Events
    Budget 2024
    Muhurat Trading
    Share Market Holiday
    Market Outlook 2024
    Resource
    Investing Guide
    Events
  • Partner
    Business Associates
    Fund Expert
    Kotak Connect Plus
    Startup connect
  • Support
    FAQs
    Circulars
    Bulletins
    Contact Us
    Forms Download
    Get your Statement

A Guide To Forex Trading

  •  4m
  • 0
  • 18 Apr 2023

Forex trading stands for trade in foreign exchange. This is a market where billions of rupees are traded each day. Of course, currency trading has its own complexities. If you are unsure what is forex trading, take a moment to get acquainted with the concept. It is essential that you understand the market well before embarking on your trading journey.

Currency rates keep changing constantly. There is no central market here. At every minute of every hour, something is changing in some part of the globe. So, forex trading offers an opportunity to trade round the clock.

Forex day trading is characterised by:

  • Liquidity: It is a high-volume market that deals with currency. There is a lot of opportunity to make a trade, which translates to a higher chance to make a profit.

  • Diversity: This market deals not only with major currency pairings like the euro and the dollar. Other pairings like, say, the Swiss franc and Japanese yen present an opportunity to trade as well.

  • Accessibility: At all hours of any working day, you can choose to trade in this market.

  • Leverage: Much of the forex currency pairings are traded on margin. Leverage helps you to trade in large quantities of currency. This can spell a greater potential for both profit and loss.

  • Low commissions: Costs and fees, like commissions, are lower compared to other markets.

Read more: What is Fibonacci trading?

Foreign exchange is traded in pairs of currencies, both major and minor. The term ‘major currencies’ refers to pairs like the dollar and other high-liquid currency like the British pound. Meanwhile, pairings that exclude the dollar are clubbed as minor currencies. The US dollar accounts for nearly 88% of all trade in currency.

The major pairs include:

  • EUR/USD (euro/dollar)
  • USD/JPY (dollar/Japanese yen)
  • GBP/USD (British pound/dollar)
  • USD/CHF (dollar/Swiss franc)
  • AUD/USD (Australian dollar/dollar)
  • USD/CAD (dollar/Canadian dollar)
  • NZD/USD (New Zealand dollar/dollar)

The most important minor currency pairs include:

  • EUR/GBP (euro/British pound)
  • EUR/AUD (euro/Australian dollar)
  • GBP/JPY (British pound/Japanese yen)
  • CHF/JPY (Swiss franc/Japanese yen)

Currencies such as the Thai baht or Swedish kroner are also traded. But such trade usually involves a greater degree of risk and volatility.

Read more: How to trade in the stock markets for beginners

Since exotic currencies are riskier, it is best for beginners to trade in major and minor pairs. The trades are plentiful. However, the profits may not be as large as some of the exotic pairs. The risk is limited here.

In forex trading, you buy one currency while simultaneously selling another one. For instance, say, you are trading in a major pair like GBP/USD (British pound/dollar). Here, the exchange rate reflects the number of US dollars you can buy with one British pound. Suppose you think the pound will rise against the dollar. In that case, you will use your US dollars to buy pounds. If the exchange rate climbs higher, you will sell the pound to make a profit. In the case of forex day trading, you do all this within the span of a single day.

Read more: Intraday trading formula

For forex trading, your strategy revolves around liquidity and volatility. Without liquidity, it is not possible to close a deal at the ideal price. Higher volatility spells higher trading risk. However, for an expert trader, this also offers a shot at a higher profit.

Is Forex Trading Profitable?

Profitability depends on expertise, ability to read movements, and quick decision-making. However, a majority struggles to make a profit. This is nothing unusual in the sense that a highly specialised market like this needs a steady hand and a sharp mind.

Conclusion

No single strategy works for all people. Keep an eye out on volatility and liquidity when you strategise your moves. Say, you decide to do day trading in foreign exchange. Make sure to do a realistic risk assessment and study the market carefully before taking the plunge.

Read more: Is intraday trading profitable?

Read More:

Your survival guide in choppy markets

All you need to know about stock quotes

Trade online at high speeds with KEAT Pro X

Did you enjoy this article?

0 people liked this article.

What could we have done to make this article better?

Read Full Article >
Enjoy Zero brokerage on ALL Intraday Trades
+91 -

personImage
Enjoy Zero brokerage on ALL Intraday Trades
+91 -