Different Types of Forex Trading Strategies for Beginners

Foreign exchange or currency trading, commonly known as forex trading is a global market which is decentralized in nature. This is the market where currencies of different countries and economies are bought and sold. The forex market is amongst the most liquid markets in the world. The forex market is so huge that the daily trading volume exceeds $ 5 trillion, which is far more than the global stock markets.

The buying and selling of foreign currencies is forex trading. When you are trading overseas, you are actually making forex transactions. For instance, you are travelling from India to United States. Therefore, you got your Indian Rupees converted to the US dollars, based on the exchange rate of both the currencies. The exchange rate is highly liquid and keeps on fluctuating. Forex trading requires detailed insights about the market and trading system and some lucrative skills.

So, without further ado, let us discuss about forex trading and some of the strategies which can help you trade in forex.

Forex Trading Strategies for Beginners

1. What is Forex Trading?
2. Forex Trading in India
3. Strategies for Forex Trading
   • Price Action Strategy
   • Trend Trading
   • Counter Trend Trading
   • Range Trading
   • Breakout Trading

So, without further ado let us discuss about options contracts in detail. Options contracts are standardized contacts and are traded on stock exchanges.

What is Forex Trading?

Forex Trading or currency trading is simply, the process of purchasing and selling of currencies done purely with the motto of extracting profits. Forex trading is also known as speculative forex trading. Currency trading or forex trading are synonymous in general sense, though the former is done with the intention of making profits out of the transaction.

For instance, suppose you want to extract profits from the growing price of Euro. The euro is trading at a rate of Rs 100 for example. You feel that the price is going to appreciate and can cross the level of 110 in a few months. Now, you can enter into a long-term position and buy the EURINR contract on the exchange. If the price goes up to the levels of 110, you can extract profits of Rs 10 per Euro.

The foreign exchange is highly liquid, decentralized and global. The key participants of the foreign exchange market are brokers, commercial banks, central banks etc. Major banks have dedicated foreign exchange departments which are linked n a 24-hour schedule on a global basis. The major commercial centers of the foreign exchange are situated in Amsterdam, London, Milan, Frankfurt, Paris, Milan, Toronto, New York, Bahrain, Tokyo, Singapore and Hong Kong. The Reserve Bank of India monitors the market movements in India and intervene if required depending on the local policies.

2. Forex Trading in India

As per the rules framed by SEBI and RBI, no Indian citizen can undertake forex trading in India through any electronic or online forex trading platform under any circumstance. As per the RBI circular of 2013, forex trading is prohibited in India. Forex trading is only legal when it is done through specified foreign exchange trading platforms and the base currency of all trades is Indian Rupee (INR). Simply, in India, you can only trade in currency pairs which are benchmarked against the Indian Rupee.

However, is you are trading in currency derivatives through a registered broker on any of the stock exchanges including BSE, NSE, MCX-SX, it is completely legal. Earlier, you were only allowed to trade in EURINR, GBPINR, JPYINR and USDINR, but after 10th December 2015, RBI allowed exchanges to offer cross-currency futures contracts and exchange traded currency options in three more pairs namely, EURUSD, GBPUSD and USDJPY.

3. Strategies for Forex trading in India

Due to the high liquidity in terms of trading volume, it is very easy to lose your money in the Forex market. It is important to have prior experience and knowledge for trading Forex successfully. You can also take the help of Forex Pack if you want to get research-based recommendations for Forex trading in USDINR, GBPINR, JPYINR and EURINR.

You can also take the help of some of the commonly used Forex trading strategies in India. Let us discuss about some of them to help you out.

• Price Action Trading: The price action strategy is the most commonly used Forex trading strategy. It is typically useful in almost all market conditions and depends on the bulls or bears of the price action in currency trading.
• Trend Trading: In Trend trading strategy, you need to identify the movement of the prices of currencies and decide your entry point depending on the same. There are various inline tools like stochastic, relative strength indicators etc. which can help you in the analysis.
• Counter Trend Trading: In this strategy, you need to make trades against the current market trend. It is done with the pure aim of making small gains and depends on the prediction that the trend may reverse.
• Range Trading: In this strategy, the trades are made in a specific range of price. You need to identify the favorable price range for trading and the price levels are usually dependent on the demand and supply of the currencies.
• Breakout Trading: As the name suggests, in Breakout trading strategy you need to enter the market at the point when the market is emerging out of a previous trading range, which is the breakout point.

Conclusion

Forex market is an entirely different market and requires prior experience and knowledge for trading. Being a highly liquid market there are high chances of making money and losing money as well. Therefore, if you are not experienced in this lucrative market, it is better to take the services of a certified investment advisor, who can help you with your forex trading by providing research-based recommendations.