Trading currency

  • Publish Date: Jul 21 2019 10:33PM
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  • Updated Date: Jul 21 2019 10:33PM
Trading currencyRepresentational Pic

Have you heard about side-business? I am sure, you have. It is basically a secondary activity of a person to lend support to his income from the primary line of activity. Normally, I have come across salaried class who are engaged in side-business to earn more at the end of month. They mostly take route of side-business   as an pre-emptive support to retirement era.

Precisely, side-business venture is dominantly an area of employed persons. However, this side business is not restricted to salaried class only, even self employed and professionals too pursue additional ventures to improve their incomes. 

There are number of activities which can be taken as side-business ventures without disturbing the primary activity of an individual. In line with the nature of this column ‘Money Matters’, let’s explore options available in the money market. In this market one of the attractive options is the currency trading. It’s not an exclusive option for side-business, but can be taken as a full-fledged activity under the guidance of a currency market consultant.

What is this currency trading? Basically, the idea that trading money can earn you money seems counter intuitive. Actually there’s a lot of money to be made in this kind of trading. I have observed lots of people engaged in currency trading without even realizing it, as a matter of fact. For example, every time a person visits another country and swaps his country’s currency for the local currency, he’s involved in currency trading. From investment point of view, currency trading is known as foreign exchange, or forex.

Although forex is the largest financial market in the world, it is relatively unfamiliar terrain for individual/retail traders. Just a few years ago, foreign exchange business was primarily the domain of large financial institutions, multinational corporations and secretive hedge funds. But with the advent of internet the times have changed. Now individual investors have ventured into this market and more and more people are hungry for information on this fascinating currency trading market.

To be a currency trader, you should know that the currency values change from time to time and the reasons are many. Political and economic activities have a great impact on the value of currency of a country. Sometimes they are driven by speculators, and sometimes they are driven by international business flows.

For example, if companies in India are importing large quantities of products made in US, they will need to exchange their rupee for US dollars to pay for the products. When this is done in very large quantity over a short period of time, it raises the demand for US dollars and the value of the US dollar versus the Indian rupee increases.

So, in succinct, currencies are the money of different countries, and currency trading is the buying and selling of these currencies. There are almost as many different currencies as there are countries, but the most popular currencies for trading are the US Dollar, the Euro, the British Pound (Sterling), and the Japanese Yen.

Now let me apprise you about risks associated with currency trading. We know, risk element is there in every business. And the currency trading is cannot be isolated from risk.  In other words, currency trading can be very risky. Currencies tend to be very volatile compared to other markets. The real key to success with currency trading is to use caution and have a trading plan.

Currency trading has caused heavy losses to many investors. Reason has been their inexperienced and undisciplined approach to trading. It is very important for you to understand your needs backed by risk tolerance capacity to avoid disasters and maximize your potential in the currency exchange market. Once you plan your goals, stick to your plans - a timeframe and a working plan for your trading.

For a beginner in currency trading, choosing a broker needs utmost care. Otherwise a fake or unreliable broker will invalidate all your gains acquired through hard work. Just check that your expertise level and trading goals match the details of the offer made by the broker. 

One of the best tips for trading forex is to begin with small sums, and low leverage, while adding up to your account as it generates profits. Keep in mind that a larger account will not necessarily allow you greater profits. Focus on a single currency pair and once you catch hold of the market and better your trading skills, expand your activity. 

Last but not the least, restrain your emotions, which means don’t fall victim to greed, excitement, panic or fear. Being logical in your approach and showing less emotional intensity will surly lead you to successful currency trading.

Recently, the Reserve Bank of India (RBI), in its monetary policy, said that to bring transparency in forex trading for retail customers, an online facility will be launched. As part of RBI’s initiative, the Clearing Corporation of India Limited (CCIL) has introduced an Fx-retail platform where you can place an order to buy and sell dollar against rupee. In order to initiate the process, you have to register with the platform as a customer. Since the registration is open, you will be able to trade only from August 5. 

The objective to launch an online platform is to bring in transparency in the fee structure and margin in case of forex transaction. Through the platform, you will know the currency exchange rate. The actual delivery will happen through the bank. You can place a buy-and-sell request based on the interbank rate,” said an official close to the development.

Let me conclude with a famous quote of Kevin O’Leary , a well known Canadian businessman, author and television personality. “Money is my military, each dollar a soldier. I never send my money into battle unprepared and undefended. I send it to conquer and take currency prisoner and bring it back to me.”