1. How to trade in the currency market?
On platforms provided by exchanges like the NSE, Bombay Stock Exchange (BSE), and MCX-SX, currency futures can be traded. Currency trading typically occurs between 9.00 a.m. and 5.00 p.m. You must open a forex trading account with a broker in order to transact on the live currency market. However, a demat account might not be necessary for you.
The first thing to keep in mind is that when you trade currencies, you always do so between two currencies. Currency trading in India will involve taking a position on a currency pair, in contrast to the equity or stock markets, where you purchase a single company share.
For instance, the EUR/USD rate indicates how many US dollars can be purchased for one Euro. Buy Euros with US dollars if you think the Euro will rise in value against the US dollar.
You sell the Euros back when the exchange rate goes up, and you get your money back.
There are generally three ways to trade currencies on the market futures market, spot market, and forward market. The National Stock Exchange, Bombay Stock Exchange, and Multi Commodity Exchange Stock Exchange (MCX) are the primary venues for currency market trading in India.
1.1 Spot market:
Financial instruments like commodities, currencies, and securities are traded on the spot market for immediate delivery. The exchange of cash for a financial instrument is known as delivery. On the other hand, the delivery of the underlying asset at a later date is the basis for a futures contract.
Spot trading and/or futures trading may be provided by exchanges and over-the-counter (OTC) markets.
1.2 Forward Market:
An over-the-counter market that sets the price of a financial instrument or future delivery asset is known as a forward market. While the term "forward markets" is primarily used to refer to the foreign exchange market, forward markets are used for trading a variety of instruments.
1.3 Future Market:
Participants buy and sell commodities and futures contracts for delivery on a specific future date in an auction market known as a futures market. Contracts for futures are derivatives that can be traded on the exchange and guarantee a certain price for the delivery of a security or commodity in the future.
The New York Mercantile Exchange (NYMEX), Chicago Mercantile Exchange (CME), Chicago Board of Trade (CBoT), Cboe Options Exchange (Cboe), and Minneapolis Grain Exchange are all examples of futures markets.
In the beginning, such trading was carried out in trading pits in financial centers like New York, Chicago, and London using hand signals and open protests. Futures exchanges, like the majority of other markets, have mostly gone electronic in the 21st century.
Pairs are the only way to trade currencies. In contrast to the stock market, where you can buy or sell a single stock, the forex market requires you to buy one currency and sell another currency. Next, prices are set to the fourth decimal place for nearly all currencies. The smallest trade increment is called a pip or percentage point.