How to Trade Forex in India? – Step by Step Process, Legalities Strategies & more
Learn about How to Trade Forex in India here.
India is a land of diversified culture and a good economy, of course, that said, Indian is a developing country.
This classifies opportunities to various traders and business personnel, especially in the field of finance.
This means forex trading is an emerging platform for many optimistic, in the banking and finance sector.
Well, before you instantly open a forex trading account, you need to know that forex trading is not entirely legal in India, but there are some ease if you trade currency pair with INR, which is Indian Rupee.
Because you already know, USD is more substantial than INR. If you want to buy USD, then you have got Central Bank of India to buy from.
Before you leap in, here are some basics for the beginners to understand specific chapters on Forex trading. Let’s begin.
What is Forex Trading?
Before you get into How to Trade Forex in India, you should know about Forex Trading in brief.
Currency Trading and Forex trading are the same terms, just different usage of synonyms, so don’t be concerned hearing currency trading.
It’s done in the global market, where you will see different currencies of different nations.
In short, currencies of different countries are traded, or you can say, if you have travelled to foreign countries, then you might have exchanged INR with that particular country’s currency.
You will get to see this practice when you open a forex trading account.
Again, why, Forex? Because the forex market is very liquid and it’s easy to earn profit in forex trading, even for beginners.
You have to buy and sell currencies, according to the margin and applying a few trading strategies; you can earn some good passive profit.
Keep in mind, the first two letters of any currency will represent the name of the country, and the third letter will tell you the currency name.
- CAD- Canadian Dollar
- USD- United States Dollar
- JPY- Japanese Yen
You can trade Forex on NSE, MSE and BSE, also known as National Stock Exchange, Metropolitan Stock Exchange and Bombay Stock Exchange.
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How to Trade Forex in India?
Keep in mind that you don’t need a Demat account for forex trading, just a trading account, and you can get started with the forex trading in India.
Here are a few steps to consider and that would make it easier for you-
Just make sure to have a stable internet connection; you do not want to predict the wrong market and invest in it; it could end up in loss.
Find an Authorized Forex Broker
There are certain factors that you must consider before partnering up with a forex broker.
Trust me, there are thousands of forex brokers available in the market, and not everyone is authentic, some are scams too.
Of course, it will be time-consuming to find a trustworthy forex broker, but it will be worth it, atleast you won’t be duped. Consider these pointers when selecting a broker-
- SEBI should authorize the broker.
- Top investors have recommended a popular broker and.
- Should offer a low or flat brokerage.
- Who offers high leverage ratio in return for low margins.
Where will you find? Just take the help of Google, and you will find tones of them, one of the best broker is Samco.
Open a Forex Trading Account
Well, opening a forex trading account involves a certain number of back and forth couriers.
But, it won’t take long, charging between 200INR to 500INR, and you can also place around 5 trading orders with the same amount.
Some brokers give a free month-first month, you can check with other traders.
Access your Trading Account
Once all your documentation and formalities are done, your broker will give you access to your trading account.
You will be provided with a software or a trading platform through which you can start trading.
Order your First Trade
Ensure, you should start with small investment amounts and high rewarding currency pairs. Yes, it would be confusing at first, but don’t worry, you will learn.
It would help if you only exposed around 1% for the starts and on the low leverage.
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Major Strategies used in Forex Trading
Once you know How to Trade in Forex, now you can apply some of these strategies to trade like a pro.
Scalping is nothing but making small profits placing multiple trades at the same time or one after another. This could be the best strategy for beginners.
Day trading, which involves the same day trading, means opening and closing on the same day.
Position Trading means you are holding a particular trade position for an extended period. It can last for a day, a week or even many years, it’s best for intermediate traders.
Range Trading involves predictions of price movements of various currency pairs. This strategy is excellent for experts.
Is Forex Trading Legal in India?
As mentioned earlier, it’s not entirely legal and also not wholly illegal.
However, in 2013, Forex trading using electronic and internet is prohibited, but if an individual trades using forex trading platforms like NSE and BSE that includes the pair of INR currency then yes, it’s legal.
Back then, the tradable currencies with INR were EUR, USD, JPY, and GBP, but since 2015, they have allowed more options such as EUR-USD, USD-JPY, and GBP-USD.
You have to be aware of the Indian FEMA act 1999, before you step into forex trading, as any illegal forex trading can lead you to imprisonment, except for NRIs.
If you are an NRI, then you might not have to face any prohibition.
Functions of Forex Trading
Forex trading does not include share or stock trading. It does not occur in terms of exchanges, but between two parties clearly and directly.
You can call it a “barter system”,or in simple words, it’s an over the counter market.
The OTC market has its types, known as spot, forward and future. The price of a forex currency pair is calculated with the base currency and quote currency.
The first currency is the “buy”, and the second currency in a pair is “sell”–
For example, USD/JPY—which means, buying US dollars and selling Japanese Yen in return.
Here are some of the mainly branched currency pairs that are classified into different categories:
Regional Pairs – The currency pairs that are categorized by certain regions, such as AUD/NZD, AUD/SGD, and EUR/NOK.
Major Pairs – The currencies under this category are highly traded, or you can say the most popular one among forex traders, which makes up 70% of the global trading market.
Exotics – A primary currency that is traded against a small/developing country’s currency such as USD/INR.
Minor Pairs – Not much popular, also in this category the major currencies are traded against each other, such as USD/GBP.
However, it might be not easy to choose amongst these categories to start with the trading, but there are specific strategies, and more information is given regarding these functions.
However, there are plenty of ways using which you can trade in currencies in the same transaction. Well, you might need a forex broker to help you proceed with the forex trading.
Of course, you can start on your own, but a forex broker will help you with everything and will get you towards good profits.
Check out Top Rated Forex Brokers available in India
Eligibility of Forex Traders
If you are an Indian, then you can start with it already. Any Indian, who is residing in the territory of the country, or a company or even financial institutions and banks can start with the trading.
However, NRIs and FIIs cannot participate in future markets of currency.
However, there are some different time zones that you should know about if you are trading in Forex because there are several other countries involved in the same.
You should select your forex trading pair and then look for the timing accordingly, and only then you can start with the trading, according to other nations trading and market opening time.
Of course, there are 24-hour markets which offer an excellent substantial market along with other earning possibilities, but it could be deprived state to invest with it.
Well, there’s a saying, “you shouldn’t trade the whole day or everyday”.
Conclusion – How to Trade Forex in India?
Yes, making money in the forex trading could be difficult, especially if you are a beginner, but remember many trading experts were beginners too when they started.
You can trade on any currency, but make sure you follow all the regulations and currency rules.
If you are an extreme beginner, then it is recommended that you trade under proper supervision; obviously, you don’t want to go into loss.
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