How to do Forex Trading in India

FEMA Consultants

How to do Forex Trading in India

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Foreign Exchange, or simply known as Forex, refers to the conversion of one currency to another. Many people actively engage themselves in forex trading, which is the buying and selling of global currencies. Whenever an individual purchases a product in another currency, or exchanges cash to go on a vacation, they’re trading forex.

However, forex trades aren’t always for practical reasons. Many forex traders who do trading in forex seek to profit from the fluctuations in the exchange rates between currencies by betting on whether the value of one currency will increase or decrease in value compared to another currency. 

Forex Trading In India

Indian stock exchanges namely National Stock Exchange (NSE) and Bombay Stock Exchange offer currency futures and options for forex trading / currency market trading in India. You can trade in forex through them. The USD-INR pair is the mostly widely traded pair. However, many other contracts are starting to catch up. 

If you expect the US dollar to rise against INR, you can purchase US dollars. However, if you expect the INR to appreciate in value, you can sell US dollars. As opposed to equity and commodity markets, trading margins for currencies are relatively smaller. RBI currently permits forex trading for Indians in four currency pairs: USD/INR, EUR/INR, GBP/INR and JPY/INR. Trading in any other currency pair, such as EUR/GBP or USD/KWB is illegal and may attract penalties under Foreign Exchange Management Act 1999. 

Steps to trade in forex in India

If you want to trade in forex in India, you must follow the steps mentioned below:

Step 1: Open an account for trading with Forex

To engage in currency exchange trading, it is necessary for you to open an account on a forex trading platform. There are many platforms allowing currency trading online in India and you can pick one based on your preference and requirements.

Step 2: Carefully monitor currency trends

It is essential to keep a close watch on the changing currency trends and even more important to know the reason for them. Only then you’ll be able to make out when it’s the right time to buy or sell a currency. Also, the currency trends generally tend to change slowly (unless there’s a war or something major), so patience is a must. 

Step 3: Invest with less money initially

Begin forex trading with less investment. One doesn’t earn a lot of profit from India currency trade overnight. Sometimes, the opposite might happen. So keep your investment less and only invest the amount you’re comfortable with. As you gain hands-on experience in forex trading, you can increase your investment’s amount.

Step 4: Set stop loss or limitation order

It is always a good idea to set stop loss or limitation order. There’s always a fixed level of risk one is willing to take in forex trading. Keep your stop loss or limitation order parallel with that risk level to avoid losing too much of your money. By following this strategy, you can reduce your losses.

Also Read: How to start a currency exchange business in India?

Conclusion

Many traders engage in forex trading. While many traders do the forex trading by themselves, many others take the assistance of brokers possessing a valid forex trading license. Make sure to do forex trading wisely, and stay well-informed regarding any factors which can negatively affect your trading. 

 

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