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What is currency trading account?
A forex account is one that holds deposits in one or more currencies for trading. These trades are based on the movement of the foreign exchange market. With this type of account, you can now unlock vast and potentially significant returns from global markets. These and other factors draw investors to forex trading.
What is Forex trading?
Before we discuss the various advantages of a FOREX trading account, let’s understand FOREX trading in detail.
FOREX, the word is a portmanteau, a blend of the words foreign currency and exchange, and self-explanatory. In FOREX, you trade in the currency market, which is the largest market in the world. The daily estimated trading volume is USD 6 trillion, spread over different hotspots around the world and remains active for 24 hours.
FOREX trading is unlike the stock or commodity market. In FOREX, traders trade currency pairs in the direction of the market. Unlike buying stocks, when you trade in currencies, you are simultaneously buying one currency and selling the other. And, you don’t need a DEMAT account for currency trading, as there is no delivery of currency involved. Most trades in the currency market are cash-settled. For online FOREX trading, you only need a currency trading account.
If you are wondering, forex trading can add diversity to your portfolio and let your investment exercise better. The market remains open for 24*7 involves a variety of players from government, banks, institutional investors, travellers, corporations, and amateur traders.
However, the forex market is decentralised. The market operates in different locations like London, Singapore, Tokyo, or New York. To participate in the market abroad, you would need a broker with an international reach.
In India, you can trade in forex derivatives in the BSE and NSE exchanges. However, the market is highly regulated, and trading in non-INR currencies is prohibited under FEMA rules. Before you start trading, go through the rules and guidelines released by the RBI regarding FOREX trading in India, so you don’t end up at the wrong side of the law.
What Are The Basics Of FOREX Trading?
Currencies are always traded in pairs. You can trade in currency derivatives in the Indian bourses. Futures in four currency pairs and F&O in three cross-currency pairs (EUR-USD, GBP-USD, and USD-JPY) are available for trading in the Indian exchanges.
To trade in foreign currencies, you will have to start by opening a currency trading account. Here are the steps involved in that,
- Open a trading account with a reputed broker with a proven record in the market
- Complete the KYC process to make the account functional
- The broker will ask you to deposit the required margin to start trading
- Request requisite access credentials from your broker
Currency trading market is highly dynamic, and the introduction of online forex trading has made it even more agile. FOREX traders are now equipped with highly sophisticated software to trade within seconds of a trading opportunity. It can be a little difficult for a new trader to get the hang of it at the beginning. So, if you are planning to trade in the currency market, here are a few tips that can be the ice breaker.
- Understand the trading style. The FOREX market behaves differently from the others, and hence, you will have to develop a sense of trading in the currency market
- Don’t try to trade in all available currency pairs. Follow one or two currencies like the US Dollar or British Pound to develop a trading strategy
- Successful currency trading is all about trading with sense, effective risk management while having a clear sight of your goal
- Know your limits – plan entry and exit carefully. No trade is a sure shot, so you will have to judge your risk appetite well before trading. A clear idea of the market will help you set your expectations right and losses small
What are the benefits of opening a forex trading account with Angel One?
- Low Commission: A large brokerage house like Angel One offers moderately lower commissions. These allow investors to trade in forex markets if they have a currency account
- No Middlemen: There are no middlemen involved when you are trading with Angel One, which facilitates seamless transactions
- Standardised Lot Size: Angel One gives standardised lot sizes for ease of trading. These range from 1000-100,000 units of currency
- Low Transaction Costs: Transaction Costs tend to be as low as 0.07%
- High Liquidity: A forex account tends to cater to a highly liquid market. This enables trades with full price discovery
- Instant Transactions: Transactions online are instantaneous
- Low Margin, High Leverage: Given that the margins are nominal, you can afford to take higher calculated risks when trading through your currency account
- Online Access: Angel One provides 24/7 web-enabled back-end service
- Interbank Market: Access to the interbank market, a global network of institutional currency traders, makes sure there is sufficient liquidity at all times
- No insider trading
- Limited regulation
- No account maintenance charges for the first year
how you can benefit from forex
- - Low Commission
- - No Middlemen
- - Standardized Lot Size
- - Low Margin, High Leverage
- - Online Access
- - Interbank Market
- - Transaction Costs as low as 0.07%
- - High Liquidity
- - Instant Transactions
- - Self-regulatory
- - No Insider Trading
- - Limited Regulation
How to open forex trading account in India?
Angel One allows you to open a currency account online. When you buy and sell foreign currencies, you tend to benefit from exchange rate fluctuations. These trades generally get executed in pairs, e.g. EUR/USD, AUD/USD, USD/CHF, USD/CAD, NZD/USD. Here’s an easy guide on how to open a forex trading account:
Brokerage houses often provide the comfort of having the documentation completed at your home. A representative carries the Account Opening, and the Know Your Client (KYC) forms with him or her
Along with submitting the completed account opening form, you will also need to provide additional documents. These documents serve as identity, address and financial proofs. This is an extensive list of documents you will need:
How to Open Forex Trading Account
Account Opening Form
Photo ID proof: PAN card / Voter's ID / Passport / Driving license / Aadhaar card
Address proof: Telephone bill / Electricity bill / Bank statement / Ration card/ Passport / Voter's ID / Registered lease or sale agreement / Driving license
Financial Proof: Current ITR acknowledgement, Current annual accounts, Form16 (in case you earn salary income), Current Net worth certificate, Current 1-month salary slip
Verification: Verification takes place via call or visit (by the brokerage house representative)
Why open a forex account online?
The online trading platforms have transformed FOREX trading. It helps in price discovery and speedy executions. There are several advantages of opening an online trading account, like the ones listed below.
- Transactions take place in real-time
- Quick execution and settlement of the trades
- Easy access to your account, carry out intra-day trades from anywhere
- Trading with your currency account does not involve intermediaries
- Low transaction costs and with 0 insider trading
With all these benefits and seamless processes, it makes sense to open forex trading account with Angel One today!
|Contract Specification →|
|Underlying||Rate of exchange between 1 USD & INR|
|Pair||USD/INR, EUR/INR, GBP/INR, JPY/INR|
|Contract Months||12 consecutive calendar months i.e. a view up to 1 year in future can be taken|
|Expiration date and time / Last trading day & time||At 12:30 noon, two working days prior to the last Mumbai Interbank Settlement day of the month|
|Min Price fluctuation / Tick size||0.25 paise or INR 0.0025|
|Settlement Daily Interim MTM settlement Final settlement||Cash settled in INR Based on daily closing price of the contract Based on LTDs RBI reference rate|
|Margin required for 1 lot USD/INR||1.75% on the first day & 1% thereafter|
|Market timings||9:00 AM to 5:00 PM|
|Events likely to impact USDINR rate →||General trend for demand/supply of USD||Impact on USD||Impact on INR|
|Increase in exports of India||Excess inflow of USD in the country||Depreciates||Appreciates|
|RBI is selling USD to meet demand for the dollar||Supply of USD increases||Depreciates||Appreciates|
|NRI Forex remittance is increasing||Increase in USD inflow||Depreciates||Appreciates|
|Positive trade balance||Increase in USD inflow||Depreciates||Appreciates|
|Increase in exports of India||Demand for USD increases||Depreciates||Appreciates|
|Rise in global prices of commodities||Demand for USD rises due to costlier imports||Depreciates||Appreciates|
|FIIs buying back USD||Excessive USD outflow||Depreciates||Appreciates|
|RBI is buying USD to absorb excess USD due to Forex inflows||Absorption of excess USD liquidity||Depreciates||Appreciates|
Currency Trading FAQs
What are the pairs in currencies?
Foreign exchange or Forex is the simultaneous buying of one currency and selling of another. Currencies are traded through a broker or dealer and are executed in currency pairs. For example: the Euro and the US Dollar (EUR/USD) or the British Pound and the Japanese Yen (GBP/JPY). The Foreign Exchange Market (Forex) is the largest financial market in the world, with a daily volume of over $4 trillion. This is more than three times the total amount of the stocks and futures markets combined. Unlike other financial markets, the Forex spot market has neither a physical location nor a central exchange. It operates through an electronic network of banks, corporations, and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one time zone to another across the major financial centers. This fact – that there is no centralized exchange – is important to keep in mind as it permeates all aspects of the Forex experience.
What are the market timings?
9AM – 5PM
What are the lot sizes?
USD-INR – 1000 Dollars, EUR-INR – 1000 Euros, GBP-INR 1000 GBP, JPY-INR – 1,00,000 JPY
When is the contract expiry in currencies?
2 working days prior to the last business day of the month
How much money do you need to open a forex account?
You can start with as little as 10 dollars. The Forex market is highly leveraged, and the broker’s margin can be as high as 50:1 to 300:1, which means that both profit and loss potentials get magnified.
To trade in Forex, you will need only a currency trading account and a bank account. DEMAT account is not mandatory since there is no delivery of currency. Also, Forex traders directly deal with the market, meaning there is no brokerage involved.
How long does it take to open a forex account?
You can now open a Forex account instantly by applying online. With the online process, if you have all your documents correct, it shouldn’t take more than five minutes to get the account activated.
How do you get your money from forex trading?
You can receive the money from Forex trading directly in your bank account.
Select the withdraw request from the broker’s website and add your bank account details. The money will get credited to the source of payment.
To automate the withdrawal process, establish an ACH link between your bank and trading account. Withdraw funds using ACH and receive directly in your bank account.
How do I fund a forex account?
You can load your forex trading account using a credit card, debit card or by wire transfer. Login to your Angel One page and select the option to add funds.
Do you need a bank account for Forex?
It makes a lot more sense to have a bank account for Forex trading.
For Forex trading having a forex trading account is mandatory and so is a bank account. You can link the bank account to your trading account for faster fund transfers.
Do you need a license to trade Forex?
Unless you are trading in bulk, retail investors don’t need a license to trade in foreign exchange. However, in India, forex trading is highly restricted and heavily monitored. You are allowed to sell only in currency pairs approved by RBI through a SEBI listed broker.
Is DEMAT account required for forex trading?
DEMAT account isn’t mandatory for Forex trading since there is no delivery of currency like equities. Instead, you would need to open a Forex trading account. You can now open a Forex trading account in India with SEBI registered brokers.
How long does it take to withdraw money from Forex?
You can place a withdraw request from your broker’s website and receive the amount directly in your bank account. The Internet has made the withdrawal process smooth and quick.
What types of documents do you accept for identity verification?
The following is a list of approved documents for identification.
- PAN Card
- Aadhaar Card
- Voter ID
- Driver’s License
- ID cards issued by central or state government
When does the FX market open?
The FX market is the largest in the world in terms of volume. It remains open 24 hours a day, opening at a different time in different parts of the world, from Monday to Friday. On Saturdays and Sundays, the market remains closed.
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