You may have been using prepaid forex cards for all your financial transactions in foreign countries. But are you aware of foreign exchange trading that multiplies your savings and exposes you to global markets? In this article, we provide you with insights on currency trading and the benefits of doing online trading in the currency markets in India.
It refers to the purchase and sale of one currency over the other in foreign exchange markets. There is over the counter, online trading of pair currencies between traders participating from across the globe.
The forex market in India is soaring high with a massive surge in daily transactions on three exchanges – National Stock Exchange, Bombay Stock Exchange and Metropolitan Stock Exchange.
Benefits Of Currency Trading In India
- High Liquidity
With nearly $5-trillion transactions taking place round the clock, five days a week at the global level, there is high liquidity in the foreign exchange market. It gives you access to buyers and sellers from all parts of the world for doing high-volume online trading with them.
The recurrent buying and selling of currencies increase liquidity in the assets with minimal impact on the value caused due to price movement. You can easily convert and transfer pair currencies, invest and withdraw money, and even enter and exit the market in just a few clicks.
- High Leverage
Forex markets offer you the benefit of borrowing money from the brokers and using it to make exponential profits through currency trading. The intensity with which the borrowed amount multiplies is the leverage ratio. Currency derivatives tend to generate a high leverage score by generating more profits and paying a margin price of the traded value.
- Low Costs
You can embark upon your retail currency trading journey with very little initial capital investment. The transaction cost is nominal as it only includes the broker fees. The brokers allow you to open a demo account with a minimal token amount and use it for online currency trading. You can maintain a low balance in this account and reap optimal returns by devising financially rewarding investment strategies.
Also, currency trading is a direct, one-o-one transaction between buyers and sellers. It eliminates the need to pay commission or exchange fees to the brokers, further reducing the cost burden of the trader.
- Hedge Against Risks
Foreign exchange is a decentralised market that safeguards the traders’ and investors’ wealth. Currency trading provides a hedge to your portfolio or funds against unfavourable price changes through single or multiple hedging, multi-currency pair, or forex options.
- Directional Trading
Currency trading occurs in a free marketplace with no restrictions or controls of a single player or entity. The forex market trends give you direction to manage your currency portfolio.
Thus, you can decide to purchase or sell a particular currency by speculating the market trends (predicting the change in future value) and using them in your favour (buying when it is weak and selling when strong). You can also arbitrage by trading the currencies in different exchanges and earning profits due to differential pricing.
To Sum Up
Currency trading is a lucrative and profitable online trading option for traders who want to buy, sell or exchange currencies in pairs over the counter. The forex markets are booming with voluminous currency exchange transactions daily owing to global accessibility, high liquidity, high leverage score, low costs, directional trading and hedging benefits.