Forex Scenario in India


Compared to the dangerous scenario which had occurred about 14 years back, the current forex situation is safe, but not what one would call comfortable. To understand the dangers that this country had at that time, one must move down history lane to the 1990's. During that time the foreign exchanges of India had dipped to such a low that the Indian Government was forced to send $400 millions worth of gold reserves to the Bank of England

The Reserve Bank of India Act, 1934 allows the RBI to store its gold up to a permissible limit. Keeping these rules in mind, the RBI had sent roughly 46.9 tonnes of gold to the Bank of England. The act permits the Reserve Bank to store 15% of its gold reserves abroad. The same act also permits the Reserve Bank of India borrow money up to a period of one month from any monetary authority against security for the same. So to defend its act the RBI had sent the gold against an amount of $405 million. This amount was secured from both the bank of Japan and the Bank of England against the gold that was deposited with the latter. Although these facts which were published in the annual report of RBI tried to hide the true story, the true fact was that the forex reserves were in an all time low.

The situation is not so bad at the moment. As of 28th September 2007, the foreign exchange reserves of India stood at a healthy $248 billion. Healthy indeed when compares to the $2,700 million of reserves that were there way back in 1990 when the fiasco had occurred.

Thanks to the economic policies of the Government of India, the export market has been increasing by leaps and bounds. New factories & industries are coming up every year and quite a substantial number of them are export oriented. Thanks to them, the amount of foreign exchange is also increasing. The world is now viewing India as one of the biggest players in the international market and is considered second only to China in the Asia pacific zone. According to the assessments made by various financial institutions, both public and private, it is clear that India is being seen by the world as one of the biggest up-and-coming economical market of the world. When the economy of a country grows in this manner, the forex scenario cannot be bad. In fact, such is the power of the India economy that it is being seen by the international financial market as one of the leading players along with countries like Brazil, China & Russia. The international market is keen to invest in this healthy economy and is even willing to pay huge commissions to get a foothold in the Indian market.

According to the foreign investors, the economy of India is being seen as not just growing, but one which is growing at a rate faster than that of the other countries of the world. The fact that many countries are setting up base in India also helps to strengthen the forex scenario. It is a well known fact that many foreign countries consider Indian specialists as a better bet than their own natives. The remittances sent back home by these Indians also contributes to swell the forex kitty. Apart from this the earning made by the BPO companies are also quite substantial. Most of the leading international giants prefer to set up their online help centers in India. Not only does this work out to be cheap for them, since Indian labor charges are lower than their foreign counterparts, but also due to the fact that the Indians are far more skilled than their foreign counterparts.

During the past four years, India, along with other international emerging markets had seen a rush in the flow of capital from the leading overseas markets. The past year has seen India over take all the other emerging economies and put itself in the number one position. Thanks to the fiasco created by the RBI in the 1990, India had to depend a lot on capital flows from overseas countries to make up for its deficit in forex. This was required because the amount of forex that India had with her was not sufficient to meet the remittances that had to be made for imports. Part of these capital flows were also utilized to pay the interest for the funds that were loaned from other countries. The situation has changed nowadays.

Due to the vast amount of accumulated foreign exchange along with those that are flowing steadily into India, this country is being forced to export this capital. The reasons for such steps are not just that the forex reserves should not be kept idle and should be invested, but also due to the fact that the RBI is looking towards different avenues to help suck up the surfeit capital that is flowing into the country. Reports being released by the RBI on diverse aspects regarding India's external payments are pointing to these types of operations.

The forex reserves of India, which stood at a healthy $248 billion as of the 28th of September 2007 is more than sufficient to meet more than 15 months worth of imports. When compared relatively with the import requirements of India, these reserves far exceed the demand. Ad to this is the factor that exports of software and other business along with the money flowing in from Indians working overseas had helped accumulate more than $28 billion during the fiscal 2006-07 and these alone were nearly sufficient to meet the import requirements of India. These situations have led to a scene where the Indian Government has relaxed its controls regarding the use of foreign exchange. Due to the huge surge of foreign exchange, there were just two options before the government of India. These were either to allow its residents to use more foreign exchange or to stem the input of foreign exchange. The government has chosen the former.


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Understanding Currency Pairs in Forex Currency Trading

Buying and selling of forex in forex trading is done in pairs of currencies. Under this, two different currencies get quoted. One currency is called the base and the second constitutes the quote or counter currency.

For example, EUR/USD is one pair of currency. Under this pair, EURO is the base currency and USD or US dollar is the counter currency. Here, it has to be seen how many units of the counter currency are needed in order to buy a unit of the base currency. The quotation EUR/USD 1.2500 will mean that 1.25 of US dollar will be needed to buy one unit of Euro.

The above rate may go up or down as USD strengthens or weakens. Trading always takes place in combination of two currencies or currency pairs.

There is always a long (bought) and short (sold) side to any forex transaction. One buys Euro (long) in exchange for yen (short) or sell sterling pound (short) in exchange for Euro (long). Profits or losses are reflected in the second currency.

The seven main currencies are USD, JPY, EUR, GBP, CAD, AUD, CHF (Swiss Franc). The most important currency pairs called the majors are EUR/USD, GBP/USD, USD/JPY, USD/CHF, USD/AUD and USD/CAD.

A major is the most liquid and widely traded currency pair in the world. All major forex trades account for more than 90% of the total daily transactions.

While undertaking Fx trading, one should also understand symbols and trading terminology. The symbol for pound / USD pair is GBPUSD and the associated trading terminology is called cable. Other terminology terms are Euro, dollar yen, Swissy, dollar Canada, Aussie etc. These are used just for the convenience of traders.

There is not much to remember in symbols, pairs or terminology. Reading them once or twice is enough. There is very little to remember and one can become familiar with all this stuff within no time.

Every position involves the selling of one currency and the buying of another, e.g. USD vs. Yen or USD vs. Swiss. Traditionally, the stronger currency is the base.

If Swiss franc is going to appreciate against dollar, then sell dollar and buy Swiss Franc and the like. While deciding which way a currency is going to move, listen to economic data and other financial information.

Potential for profits exists as long as there is movement in the exchange rate. This is because one side of the pair is always gaining. All that is necessary is that an investor has to be on the right side.

Forex Trading Mistakes That Will Cost You Money


When it comes to making forex trading there seems to be a recurring mistake people make that inevitably end up failing at this business. I'm going to present them to you so you don't make them.

Mistake 1: You select a poor broker.

Brokers are a pivotal point in this business. These are the people that handle your money and do the trades on your behalf. If you slack and get a poor one, you're putting yourself at a disadvantage. There are brokers out there that turn out to be scams, so you need to be cautious that you get a reputable business. The best way to do this is join some forex forums online and talk to people. Ask them which is the best and why. Ask them which ones they use. If you see a trend where the same name comes up, use that.

Mistake 2: Not Watching the News.

I've placed trades before only to see them crash after something on the news came on. You'd be surprised how something as small as GDP growth and inflation will have an effect on your trades. They could dive down just a few hours after you buy. This was an expensive lesson in my forex training. Take the time and watch the news of your own country and the country of the currency you're dealing with.

Mistake 3: You Don't Use Automated Software.

This was the hardest mistake for me to get past. I'm one of those guys that just likes to do it myself, but I eventually ran into the inevitable trouble of how to deal with my money when I need to goto sleep. There's no escaping it. This market is 24hrs a day, so you're going to have to sleep sometime. It can be extremely unprofitable to take your money off the table every time you goto bed. I picked up Forex Killer and it handled my trades while I slept. It automatically finds trends. It will buy or sell depending on what will make you money. This tool helped triple my profits.

These forex trading mistakes are deadly to your bank account. Don't get caught up with them and end up losing your money. Be educated, be smart and profit.

Forex Currency Trading Company - Online Learning on Foreign Currency Trading

Are you interested in starting a foreign currency business? Or are you interested in investing in a foreign currency but just do not know how? If you answered yes to either one of the preceding questions or both, you would probably be interested in the services of a forex currency trading company. If you are familiar with stock investments, the foreign exchange currency trading company acts in similar ways as a stock broker does in the company stocks market.

You tell the forex company about your intention to invest in a particular currency, you turnover your investment to them and the company does the trading for you. Once you start earning money from the buy and sell transactions you make, the forex trading company credits your earnings to your account and offsets losses, if there are any. The company also gets nominal commissions from the values of the trades they have facilitated for you.

Nowadays, there is a proliferation of internet-based forex currency trading company. Some are run by recognized names in the business or are associated with big banks and financial institutions. Whether it is internet based or one with physical offices you can go to or call to give them your instructions, these companies operate in the same manner, in general. Internet-based foreign exchange trading companies, however, provides you, the investor or trader, some control over the transaction by allowing you to execute the trades yourself. You can do this whenever you want or wherever you may be. Most of these companies offer a working FX trading platform which you can use in placing orders. By using these internet facilities, you can practically transact or trade in foreign currency any time of the day and any day of the week.

A forex currency trading company also informs and educates their clients. They provide information relevant to the foreign exchange business such as market outlook reports, analyst reports, technical analysis and the like. Some also provide software and other tools to aid an investor in monitoring and analyzing his investments. Likewise, most internet-based companies offer online demos and tutorials geared to train the forex investor or trader and make him more confident in the trade.