What is Forex Market and How does its Work

rnWhat is Forex Market:- The forex market is the market in which participants can buy, sell, exchange, and speculate on currencies. The currency market is considered to be the largest financial market with over $5 trillion in daily transactions, which is more than the futures and equity markets combined. The foreign exchange market in India has been around for about 40 years now. The market started operating in 1978 after the government's decree. After its establishment, the forex market has seen significant growth over the years. The market is regulated by the central government and all aspects of the trade are defined by national laws. Forex Trading is the same as that of equity trading. In equity trading rate of share matters while in forex trading exchange rate matters. You can buy or sell currency pair as per your expectation of movement in currencies. Please refer to the example given below for better understanding. Market Timing:- Globally, the forex market is open around the clock 24 hours a day from Monday to Friday. In India, trade is possible from 9 AM to 5 PM Regulatory Bodies:- SEBI (Security Exchange Board of India ) and RBI (Reserve Bank of India ) both are the regulate the Indian Forex Market. How its Work:- The only way to trade Forex in India is by using an Indian Brokerage with access to Indian exchanges like NSE, BSE, and MCX-SX. However, these exchanges will also give you access to the only 4 tradable Forex instruments in the country. Those include the EUR/INR, GBP/INR, JPY/INR, and USD/INR. One thing that you’ll notice is that all tradable Forex instruments in India include the Indian currency, the INR. Essentially, it is illegal to trade currency pairs that don’t include the INR in India. So, pairs like the EUR/USD, GBP/USD, and USD/JPY are all off limits. When a trader decides to trade in the forex market, he or she must first open a margin account with a forex broker. To trade $100,000 of currency, with a margin of 1%, an investor will only have to deposit $1,000 into her or his margin account. The leverage provided in this case is 100:1. Although the ability to earn significant profits by using leverage is substantial, leverage can also work against investors.