Forex Trading Industry: For Players of the Free Society
Created on 18 Aug 2022
Wraps up in 7 Min
Read by 718 people
Updated on 26 Aug 2022
In the 2010 superhit movie Wall Street, Gordon Gekko said, "Money never sleeps," But did we really think it would turn out to be so true? We were all left in deep deliberation for sure.
Money is very volatile. It might sound ridiculous to some, but if you desire to make money at even three at night, you can do so.
The foreign exchange market is open 24x7 for players, dealers, and investors. With the help of the best forex trading platforms in India, we can engage routinely with it to yield high profits.
Read this article to know more about the forex trade, the best forex trading platforms, and the most traded currencies!
What is the Forex market, and How Does It Function?
"The goal of a successful trader is to make the best trades. Money is secondary." - Alexander Elder.
The forex trading industry covers a significant part of the financial market. It lets us buy and sell a particular currency against the other currencies. The investors and dealers can exchange currencies through this market to generate profit.
We can get all the aspects of buying, selling, and exchanging currencies at present value or determined prices. In short, the forex market is an OTC (over-the-counter) global market that allows the exchange of different currencies on the same platform. As players, we can speculate on the prices and currency values to accumulate profits using India's best forex trading platforms.
How Does It Work?
We can benefit from forex trading in several ways; but to do so, we will have to go through these steps:
The first and foremost step to entering the forex market is creating a CDF or spread betting trading account. You can take aid from the best forex broker in India to get a forex trading account.
Search for the currency pair to trade. You should use only the best forex trading platforms in India to conduct a genuine and safe exchange.
Implement the strategy. No one likes risks even though it is inevitable. We should pre-plan and prepare strategies to deal with the upcoming exposures. For example, you should trade only with a specific portion of the surplus money.
Use the risk management measures to ensure things do not go haywire.
Once the trade is successful, you should reflect if the strategies and techniques work in your favour for future exchanges in the best forex trading app in India.
Functions of Forex Market
The functions of the forex market are:
- Transfers purchasing power across several countries, enhancing the feasibility of trade and investment
- Provides a central base to set the currencies' prices
- Minimises the risk of loss when the exchange rate changes
- Gives room for risk-free opportunities to traders
An Overview of the Forex Trading Industry
Forex trading started in the 1970s when the international powerhouse of currency, the USA, gave a green signal to float the currencies freely in the Forex industry.
It brought a fundamental shift in the monetary system from the fixed exchange rates of the Bretton Woods agreement to a flexible system where countries were able to float the currency rates. It gave birth to many technological advances and innovated financial theories and practices.
There are many best forex trading platforms in India to assist traders.
As per the latest reports:
- USD remains the top-most traded currency in the foreign exchange market.
- The rupee settles at 79.78 against the US dollar.
- The forex market has reached a value of $702 billion. The renowned IMARC Group predicts it to touch the boundary of $1066.8 billion by 2027.
Top 5 Currency Exchanges in India
"Impatience for profit means inevitable loss." — Mario Urlic
It is not easy to select which currency is a safer option to proceed with. We must determine the currency pairs contingent on their trade volume if aiming for higher profits.
However, before settling for the pairs, it is better to learn more about the five currencies to trade in the best forex trading platforms in India:
1. US Dollar (USD)
No surprises there!
USD was, is, and most probably, will remain the most traded currency in the forex world. The central banking authority of the US, FED (short for, The Federal Reserve System) created the US Dollar in 1913. Every best forex trading platform in India provides the option to exchange USD.
- They make up approximately 84% of the daily transactions.
- USD makes many profitable currency pairs. For example, USD/EUR, USD/JPY, and such.
- It is most volatile at the open New York session around 8 am (EST).
2. European Euro (EUR)
Located in Frankfurt, Germany, the European Central Bank makes the decisions regarding monetary policies. It is one of the most common choices of players on the best forex trading platforms in India.
Although very well-known, the Euro comes off a little slower and weaker than the fellow popular forex currencies.
- It trades between 70-80 pips on average but goes up to 100 pips when more volatile.
- It is most volatile during the London sessions at 8 am (EST).
- EUR makes the best pair with USD, ZAR, GBP, and others.
3. Japanese Yen (JPY)
The Bank of Japan acts as the central bank of the country. It was established in 1882 and governs policies and currency issuance. It also analyses data and the economy while keeping the market conditions in mind.
Japan is the abode of the world's most powerful force of retail traders, with over 800,000 forex accounts.
- JPY makes a good pair with USD and GBP.
- It can be seen as the most volatile from 7 pm to 4 am.
- Have 70-140 pips on average but can reach over 200 pips when volatile.
4. British Pound (GBP)
The bank of England is the central bank of the United Kingdom. It has a Monetary Policy Committee (MPC) responsible for deciding interest rates and monetary policy, considering the economic stability.
You can trade forex in GBP from any best forex trading platform in India.
- It is usually volatile during Asia sessions from 8 pm to 4 am (EST).
- It can encompass about 100-120 pips on average.
- As per the best brokers in India, it goes well with the Australian Dollar, USD, JPY, and such currencies.
5. Swiss Franc (CHF)
The Swiss National Bank is different from other banks. It has both private and public ownership. Hence, it makes SNB a corporation under special regulation. The governing board decides the policies to maintain economic and financial stability.
You can trade Swiss currency from the best forex trading platforms in India.
- It is the most volatile during the London session from 3 am to noon (EST).
- The average range goes up to 45 pips.
- It pairs well with USD, JPY, CAD, and others.
Who Controls the Forex Market?
It only makes sense to believe that there must be a higher authority controlling and managing the actions of the world's largest financial market. But most people will be shocked to know that no one handles the forex trading market. Yes, it is true.
Furthermore, we can say that it operates on the demand and supply of the two currencies. For example, say A bought a notebook in the US for $2. Now he would have to convert rupees into USD to pay for the item. It will increase the demand for dollars, causing the dollar/rupees ratio to rise.
However, Central banks are responsible for fixing the price of their native currencies. They also validate the market to ensure that traders engage in fair trading only.
Who are the Most Common Market Participants in Forex Trading?
Have you thought about who trades forex?
You may be surprised to learn that the forex trade does not only include various players and dealers but comprises many types of players. Listed below are some key forex market participants.
1. Commercial and Investment Banks
Many banks come together at the interbank market; to trade currencies directly among themselves. Commercial banks facilitate foreign exchange transactions to clients and assist in the speculation of prices and trade. You can do forex exchange with the best forex trading platforms in India.
2. Central Bank
Central banks influence the forex market largely. It is responsible for the fixation of its native currency price. It often intervenes as a speculator to increase or decrease the currency value.
3. Investment Managers and Hedge Funds
Hedge funds and portfolio managers take up the second spot as the prime players in the forex market. They trade currencies for large accounts like endowments, foundations, etc. Hedge funds do speculation on currency trade to plan investment strategies.
4. Multinational Corporations
Multinational corporations engage in the export and import of goods and services that require foreign exchange. These companies trade forex to avoid the risk coming with foreign currency translations.
5. Individual Investors
Individual and retail investors base currency trades comprising fundamental factors like inflation rates, interest rates, etc., and technical, i.e., resistance, price patterns, support, etc.
Forex trading does not always come with positive results. Many face massive losses to get a better grip on the market. As Mario Urlic said, "Behind every successful trader, there are a lot of unsuccessful years."
Beginners can start by learning the latest forex strategies on India's best forex trading platforms. These platforms help them conduct safe and secure trade. They can also use the best forex brokers in India to ease their way into this dazzling world of loss and gains.
Forex markets aid banks and traders with proper risk management strategies when investing. It helps various sectors of the economy to predict the profits and losses that may come with the fluctuations occurring in the global market. One can use India's best forex trading app to engage in currency exchange.
Tell us which currency you think is the best to trade and why in the comment section. Do share the article with your friends!