Stocks and shares are a well-known way of accessing the market, but they can be cumbersome, and during a downturn, it’s harder to turn a profit. Currency trading, known as forex, is a viable alternative offering opportunities for solid returns regardless of market conditions.
Although forex provides the chance to invest very successfully, it’s a market that can move fast and punish those who haven’t prepared. Therefore, to help you get started, here are some top insider tips on currency trading in India.
Futures are the Future
There are two main types of currency trading around the world: spot and futures. In the Indian market, currency futures are more common. This involves you taking a position on the future price of a currency pair, allowing you to buy or sell at a price which is fixed in advance.
Futures do not physically deliver the cash; if you’re successful, your account will be credited with the extra that you’ve earned. Conversely, if you made a loss, you’ll need to pay the difference, not the full transaction value.
Understand the Market
Forex is a type of financial derivative which is particularly sensitive to external events. If market conditions are turbulent, you’ll see an instant effect on the value of currencies.
This volatility makes currency trading very attractive as it provides the opportunity for large swings. On the flip side, it also carries the risk of large losses so you’ll need to be very clear about your strategy before you start. Before you dive in, it’s recommended that you have read some well-written guides on forex trading, so you have a good grasp of the basics.
If you are trading during times of geopolitical instability, or when there’s an election, you’ll need to be able to navigate a market which is even more volatile than usual. This is why understanding market influences and using available tools such as stop loss orders is vital for success.
Prepare for Losses
It may sound like a strange mindset to start out with, but accept that there will be losses when you trade currencies.
Understanding that you won’t win every position and that some days you may lose heavily is critical in managing the psychological component of trading. It is a huge battle and one that you’ll need to win if you want to be able to trade with success. Being disciplined enough to stick to your strategy, even in the face of significant losses, will help to limit your losses and prevent you from chasing a win.
If you accept from the start that there will be tough days, it will come as far less of a shock when you lose a trade. Being able to shrug it off, hold your nerve and continue trading is what every successful currency trader needs to be able to do – whatever country they are in.