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An Untapped Opportunity: Forex Trading in the Pakistani Rupee (PKR)

There are two types of currency exchange protocols applicable in world economies – a floating
and a fixed rate system. In the floating rate system, currency supply and demand dictate the
value of the local currency against other world currencies. In the fixed system, central banks
typically step in to peg the rate of their currencies. Countries with a fixed rate system often ban
forex trading.

It may come as a surprise to many of you readers, but forex trading is legal in Pakistan. Of
course, with the nation’s economy heavily dependent on forex reserves, there are restrictions on
the outflow of foreign exchange – especially the USD. However, with the right trading platform to
support you, there’s plenty of opportunity to make money trading the Pakistani rupee (PKR).

Understanding the PKR Dynamics

According to a recent report by Bloomberg, the global currency trading expanded to around $6.6
trillion-a-day. This leaves plenty of opportunity to profit from understanding the trading dynamics
of various currencies. So, what are the dynamics of trading the Pakistani rupee? Well, it’s as
simple as it is complex.

The first lesson to understand is that, like any forex trade, you’ll need to “pair” the Pak Rupee
with another currency. So, unlike in trading stocks – involving the dynamics of a single stock –
forex trading involves understanding the interconnect between a pair of currencies. The most
popular pair, for the Pak rupee, is the U.S. dollar (USD). So, that pairing is USD/PKR.

In this pair, “USD/PKR” represents the number of Pak Rupees a trader can buy with one USD.
So, a dollar today buys approximately Rs. 160 Pakistani rupees. The trading thesis between
Pak Rupee and any other currency is this: If you think the exchange rate of the other currency
(in our example, USD), versus PKR, is set to increase, then you’ll use Pakistani rupees in your
account to buy USD. When that increase does occur, you’ll sell the USD and convert the funds
into the Pakistani rupee for a profit.

Of course, you’ll need the tools and sound forex trading knowledge to make money in a volatile
currency like PKR. In the last year, the currency has performed erratically versus the greenback.
So, your understanding of the dynamics is important.

A firm grasp of forex trading tools and techniques, such as momentum indicators and reversal
candlesticks help. But most importantly, to make money trading a currency like PKR, you’ll need
two things: A good forex broker, and an exceptional forex trading platform.

How It’s Done

The Pakistani rupee is a comparatively lightly-traded currency on international currency
exchanges. So, the typical PKR forex trader will convert their Pakistani rupees into more liquid
currency, such as EUR or USD. We’ve briefly spoken about how it’s done in a straight USD-
PKR transaction: Buy USD (using PKR) when there’s upward momentum in the USD (versus
PKR). Then, sell USD once you’ve hit your target rate of return, and convert back to PKR.

Other traders might use leverage, and a EUR/USD strategy, to make money trading the
Pakistani rupee. If you think EUR is showing upward momentum versus USD, convert your
(weaker) PKRs to (a stronger) USD. Assume you now have USD2,000 to play with. That $2k,
with broker-provided leverage (for example a 10:1 leverage) turns to USD 20,000 (USD2,000 x
10). Next, you buy EUR using your USD.

If all goes according to plan, and the EUR rises, you can sell your EUR and buy back into a
USD position. After settling your fees, and accounting for trading commissions, you’d likely be in
a much better net profit position with this trade, than the USD/PKR transaction.

USD/PKR: Learning to Make Money

Though most USD/PKR traders choose to act on the Asian session, there are plenty of global
opportunities to trade the pair and make money. On paper, however, the prospects of making
money in forex trading of the Pakistani rupee might look as simple as converting from one
currency (PKR) to another (USD or EUR) – and then waiting it out until the money comes rolling
in. The truth is, it’s a bit more involved than that! And that’s where a trading platforms’ forex trading tutorial
can be a precious resource.

A good forex trading platform will walk you through everything you need to know for success.
From registration and navigating the interface, to the basics of trading foreign currency pairs,
opening and closing orders – and yes, even understanding the risks involved. Your best hope of
making money trading the Pakistani currency is in understanding complexities like Pip size, Lot
size, Order, Call…and much more.

You’ve heard it said many times: “Don’t try this at home alone!” – and that phrase definitely
applies to forex trading the volatile Pak rupee! Unless you have the benefit of a sound forex
trading tutorial from a credible trading platform, attempting to make money in USD/PKR trading
might be a risky proposition. It all revolves around understanding the basics of forex trading,
without which traders, especially novice investors, might get burned.

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