3 Ways to Start Trading in Currencies – The Complete Beginner’s Guide 2023
The foreign exchange market is a global and decentralized market that operates as a platform to buy or sell currencies.
Currency trading is popularly known as Forex trading which allows buying or selling currencies in pairs. Say, on today’s date, if the value of the US dollar is 79 INR, and you assume the dollar to strengthen against the Indian rupee, invariably you will purchase more dollars. On the contrary, if you assume the dollar to lose value against INR you will invest in buying rupees. The value of these trades is determined by the exchange rate.
The most popularly traded currencies apart from the US dollar are, the Pound, the Euro, and the Yen. These currencies are freely traded across the world and are called Hard currencies.
The “base currency” and the “quotation currency” together make a pair of currencies. When we trade EUR/INR, the Euro is taken as the base currency, and INR (Indian rupee) is taken as the quotation currency and is represented by EUR 1/INR = 87.
The leading Mo Investor apps and websites allow you to trade in currencies. In India, currency trading mainly happens on National Stock Exchange (NSE), the Bombay Stock Exchange (BSE), and the Multi Commodity Stock Exchange (MCX).
Steps to follow before you start trading in currencies
Step 1: First thing you need to do is open a trading account in any of the leading trading apps available online. Mostly these accounts are free, and you don’t need to have cash or equities to start trading in currencies.
Step 2: Observe. You need to be patient and diligently follow the trends of the market to understand when or what to buy or sell. If you are trading USD/INR, when the USD is strong against the INR, it might be the right time to buy INR and sell dollars.
Step 3: Most trading apps offer a trial account for beginners where you can use virtual money to practice currency trading. This is an excellent feature to learn the tricks and at the same time is risk-free as you are not losing real money.
Once you are confident to start trading, make sure to set a stop loss with the broker. This will limit your losses by closing your account automatically if you lose beyond a certain limit. This feature also comes free of charge and is extremely important to minimize your losses.
More things to learn for beginners
Trading currency futures is also an option for people trading in currencies. If you think the US dollar will appreciate against the INR in the future, you purchase USD/INR futures. On the other hand, if you predict USD to depreciate against the INR, you would be selling USD/INR futures. Also, one must know that the margins from currency trading are significantly smaller than equity or commodity trading. The exchange rate depends on various social, political, and economic factors so you must be updated all the time to be a successful currency trader. Last but not the least, choose your broker wisely. Make sure your hard-earned money is safe with a reliable broker having a good track record and ample experience.
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