| February 04
Benefits of Currency Trading in India
or forex trading is the most heavily traded markets in the world with volumes
standing at $5 trillion a day, much more than that traded on NYSE. In India,
this market is on the rise with daily transactions increasing exponentially.
Earlier, there were only big tickets players like banks, institutional
investors trading heavily in this market. However, with the advent of
derivative products, even retail participants can leverage this opportunistic
market. Here are some major benefits for entering this market in India:
- Lower margin requirements:
Unlike equity markets, Currency trading allows you to buy and sell by keeping
only a small percentage of the position. This allows the traders to
achieve the optimum rate of return on their deployed capital.
- Arbitrage: The currencies
are traded on exchanges like NSE and BSE in India. The traders can benefit
from the inefficiencies in the price from buying low to selling high on
- High Liquidity: One of the
most important criteria to run a business is enough liquidity, which means
to convert the asset into cash. Currency trading is the largest market in
terms of volume turnover in the world. One can speedily enter and exit
huge positions with a single click.
- Hedging: The process to
protect your existing investment portfolio against future unforeseen
losses. This is usually practiced by residents to protect their offshore
investments and NRIs to hedge their domestic portfolio. It is also adopted
by importers and exporter to limit their losses owing to currency rate fluctuation.
- Speculation: To gain from
the highs and lows of the currency exchange rates, a trader must know the
possible direction. For example, there is a possibility of USD
appreciation with crude oil price rises, the trader would buy USD/INR
future. Similarly, if there is a possibility of INR appreciation, they
would short sell USD/INR futures to make a profit from the movement.
- Lower entry barrier: The
introduction of the derivative product in the last few years has opened
the door of forex trading to the retail traders. With a small capital
also, it is possible to make a mark with the correct strategy.
trader ensures their journey with the currency market, there is no looking
back. There is always a market open in the world, even when the domestic market
closes. With the massive expansion of the decentralized market over the years,
millions of traders are working hard every day to grab a piece of their profit.