What is Forex Trading? - Introduction

A economic transaction made between two countries residents who involves in exchange of
one country currency into another.  A person may import the goods and services from other country or he may export them from his country.  If a investor invests abroad gives him higher returns of income.  A person who visits India and not an Indian, buys a product has to spend in India rupees.  A Businessman from India earns dollars while on job abroad, but his parents in India want rupees to buy a farmhouse for him in Darjeeling.  In the above cases, the source of purchasing power is available in one currency whereas its use is in another currency.  Each currency has geographical jurisdiction to function as legal tender in settlement of debts.  To convert currencies from one form to another the above legal transactions are executed with the inter-mediation of the banks in the country.  This process of currency conversion is termed as foreign exchange.  While the foreign currencies themselves cannot function as legal tenders, but yet serve the purpose of exchange of values.

Forex Trading

 Learning Objectives

  • Understand the meaning of Foreign Exchange
  • Difference between Foreign Trade and Foreign Exchange
  • Foreign Exchange Regulations Overview
  • Setup of Foreign Administration of Exchange in India
  • Role of Commercial Banks as Authorized Dealers.
If there any monetary transactions between 2 countries and it relates to foreign exchange. These transactions are on two basis.  They are Trade transactions and Non-trade transactions. When there is import & export of goods & services, they are called as trade transactions. Whereas, working in abroad and going tour to abroad are the good examples of non-trade transactions.

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