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What Is Forex Trading?
Forex or FX is the short form of Foreign Exchange. It is also called as Currency Exchange Market. Foreign currencies are traded in this market place. Value of the currencies is subject to change that the values may appreciate or depreciate. This change is a factor for trading them. The trader buys the foreign currency at some point when it has low value, and then sells it high when the value rose. Mostly banks play the dealership role. Under some of the known Indian exchanges, this trade is working with the guidelines of RBI.
How Forex Trading Works?
In Forex Trading, currencies are exchanged in pairs. Examples of pair of currencies are USDINR, EURUSD, EURINR and JPYINR. During this trade, relative value of the currency is not taken instead the whole value. It works with the buy and sale principle depending on the ups and downs of the currency. It is similar to the trade of share market. Here, a person buys a sum of currency by paying a sum of another currency. In USDINR rate, USD is United States Dollar and INR is Indian Rupee. Here in this exchange, United States Dollar will be purchased with the Indian Rupee. USD has a property to rise in its value against INR. So, one can have profit by selling when the value rises. There exist many private and public finance institutions to deal with this exchange. This is how the forex working. One can have some extra profit by using leverage.
Leverage
Leverage is a kind of debt used for a good return of the investments. Leverage is the debt amount of an asset. It is the multiples of amount that a person is provided with during the purchase of currency. The investors pay only a small percentage of money from the whole sum he intended to invest. After the small amount he paid, the remaining balance amount is termed as leverage. It is given as debt to the investor by a broker or dealer he approaches. This will be taken back when the investment is over, with little brokerage. For example, a person is investing Rs. 1000 for buying a sum of currency. But he intended to invest Rs. 10000 for the purchase. Here he can get the remaining Rs. 9000 as a leverage which will be provided by the mediator of that trade. Usually all the leverages come with brokerage. If an asset or property is given as leveraged, one can conclude that property is under debt.
Liquidity
Liquidity means a demand for a service or for a product whenever the sale value of them is high. As this market is much bigger, the rate of liquidity is high. In Forex trade, we find the term liquid currencies which mean the termed currency has high demand and sale value. Some currencies like USD, EUR have high liquidity.
Profit in both Rising and Falling Markets
Forex trading is profitable both during rise and fall of the market. It is not like share or stock market. One can sell the currency when its value decrease and later purchase the same for low cost at another point. Likewise, one can purchase the currency and sell it when its value increase. There exist losers as well as winners in this trade. Following right strategy like purchasing low and selling high will mitigate the risk of the investments. Millions of people make considerable money in this market place. It is advisable that before involving in this trade, one should have basic understanding and information about the currency trade. Alertness about the market status better helps for profit making.
Round-the-Clock Trading
With the help of Internet, everyone can do this currency trade anywhere in the world. Except Saturday and Sunday, trading can be done in all days of the week.
Free Demo Accounts, News, Charts and Analysis
For new users, there exists many online sites to give free demonstration about the money trade. They provide information about the trade, important news and analysis with charts. Online help tool makes this trade easy to understand and to move further.
Documents Required
Proper documentation is required to do this trade. Documents that are needed for this are Pan card, Account proof, ID proof like voter ID, Passport, Driving licence, photograph, cancelled cheque leaf from bank and Phone number.