Currency Trading In India‘ has always been the hottest topic among new and seasoned traders. The primary reasons behind its enormous popularity will remain its ability to generate significant returns, high liquidity and round-the-clock availability.
The rise and fall in the value of currencies due to high volatility create an immense opportunity for traders to register huge gains. The currency market is vast and is not limited to just one or two countries. It has expanded globally.
Being the emerging economic leader, India offers tremendous opportunities and high-profit prospects, running on smooth regulations. So, if you’re Indian planning to trade currency, read this beginner’s guide on currency trading in India.
What Is Currency Trading and How Does It Actually Work?
Have you ever wondered which is the world’s largest liquid market? It’s not stock or commodity; it is a currency market.
Currency trading refers to speculating on the currency prices to make a profit. It takes place mostly in the over-the-counter (OTC) market, where huge financial institutions, corporations, and hedge funds trade amongst themselves based on their needs.
While corporations primarily utilise this market to hedge their underlying Forex risk due to export/import, hedge funds and financial institutions use it to trade or hedge their foreign investments.
The currency market sets itself apart from other financial markets by its 24-hour trading, liquidity, depth, and leverage.
For instance, the EUR/IND rate shows the number of Indian Rupees one Euro can buy. If you speculate the Euro will increase in value, you buy Euros with INR. When the exchange rate increases, you sell the Euros back and cash out your profit.
Currency Trading In India: An Introduction For New Traders
Currency trading in India is often done in three primary ways: The spot market, Forward market, or Futures market.
Currency trading in India is not physically settled, which means that there is no actual delivery of the currency upon expiry. You are most likely referring to currency futures trading when you ask what currency trading means.
Currency futures are predominantly traded on the National Stock Exchange (NSE), the Bombay Stock Exchange (BSE), and the Multi Commodity Exchange Stock Exchange (MCX). The Indian currency trading hours are from 9 a.m. to 5 a.m.
Is Currency Trading In India Legal?
The currency trading in India is completely legal and is regulated by the capital markets regulator SEBI oversees forex trading in India. Meanwhile, the RBI, the country’s central bank, controls currency transactions. The market watchdogs ensure that enterprises meet the Foreign Exchange Management Act (FEMA), 1999.
Along with the INR, currency trading in India is authorised in the following pairs: US Dollar, Japanese Yen, British Pound, and Euro. Cross currency pairs are also available for trade, including EUR/USD, USD/JPY, and GBP/USD.
In India, currency trading on Contract for Differences (CFD) platforms is prohibited. A CFD is when an investor enters into a contract with a broker who purchases the asset on their behalf. The investor either gains or loses based on the difference between the opening and closing prices.
What Are The Benefits of Currency Trading In India?
Here are some of the primary advantages of currency trading in India:
Low Margin Requirements:
Unlike stock markets, currency trading allows you to purchase and sell while holding only a tiny portion of the position. This enables traders to earn the best rate of return on their invested capital.
In India, currencies are traded on exchanges such as the NSE and BSE. Traders can profit from pricing inefficiencies on several exchanges by buying low and selling high.
One of the most critical factors is checking out the market’s liquidity, which is the ability to transform assets into cash. Currency trading is the largest market in the world in terms of volume turnover. Traders can quickly exit or enter huge positions.
It is a trading strategy for protecting your current investment portfolio from potential unanticipated losses. Residents often use this to protect their offshore investments, while NRIs use it to hedge their local holdings. Importers and exporters use it to reduce their losses due to currency rate fluctuations at the end of the day.
In order to profit from the highs and lows of currency exchange rates, a trader must be aware of the likely direction. For example, if the USD is expected to climb in value as crude oil prices rise, the trader might purchase a USD/INR future. Similarly, if they believe the INR will rise, they will short-sell USD/INR futures to profit from the change.
Lower Entry Barrier:
The emergence of currency derivatives in recent years has made forex trading accessible to retail traders. With the right plan, it is also feasible to build a name for yourself with a minimal investment.
What Should You Keep in Mind When Start Currency Trading In India?
To be a good currency trader, you must first master the fundamentals, goals, and risk management. Here’s a list of things to keep in mind:
Know Your Trading Style
Every currency trader has a unique trading style. This corresponds to the trader’s risk tolerance. Before starting trading currency, you need thoroughly understand yourself.
Choose Reliable Brokerage Platform
A reputable broker is essential for success in forex trading. When it comes to currency trading in India, a reputable broker will hold your hand and keep you up to date on live currency market news.
Understand Your Limitations
Before starting forex trading, establish the trades’ entry and exit points. Nothing provides surety, so be prepared to double down or exit if the scenario becomes unfavourable. A strong understanding of potential trade scenarios will be quite beneficial and help you keep your losses to a minimum.
How To Start Currency Trading In India?
Trading currencies is not rocket science; in fact, it is a quite simple process. Here’s a simple step-by-step process to start currency Trading in India:
Open An Account With A Regulated Broker
To start currency trading in India, traders must register with a registered broker like InvestFW. The Securities and Exchange Board of India (SEBI) oversees currency exchanges and brokers.
As a result, before joining up with a prospective broker, ensure that the company complies with SEBI requirements. To open an account, visit the official website of the broker and fill out an application form. Enter your details such as name, your email id and/ or mobile number to create an account.
Verify Your Account
To verify their accounts, traders must complete the KYC process. To authenticate their identification, clients might submit the following documents:
- Copy of National ID Card/Passport/Driving License
- Bank statement/utility bill
Following that, you will be registered and receive OTP directly on your email id.
Add Funds To Your Account
To begin trading currencies, you must first fund your account. Brokers often accept a variety of payment options. Examine all the available payment methods with your prospective broker and choose the best one for you.
Navigate To The Trading Platform
To access the foreign exchange market, traders require a trading platform. MetaTrader4 and MetaTrader5 are the most popular trading platforms right now. Some brokers, on the other hand, provide their own unique trading platforms.
You can utilise a trading platform either online or on a desktop computer. Clients can also download a trading platform on their mobile devices.
Begin Trading Currency
When you have completed all of the requirements, you are ready to begin trading. Log in with your live account credentials to your trading platform. After enrolling into a trading platform, use the market watch to locate the allowed trading pairs and begin placing trades.
What Are The Risks Associated With Currency Trading In India?
Before commencing currency trading in India, it would be helpful to learn that it carries a significant risk of capital loss. There are extra variables when dealing with a currency pair. However, risks are inherent in any financial transaction or investment.
Limit your risks in currency market trading by limiting trading with borrowed money and never overextending yourself. These are the only two significant risks.
As with any sort of trading, there will be days when you have more winning trades and days when you lose more. Learn from your mistakes and use what you’ve learned for your future achievements. Keeping a diary about your transactions is a fantastic approach to knowing where you went wrong.
What Are The Available Currency Pairs In India?
Currently, the foreign exchange market in India offers seven currency pairs for trading. Here’s a list of available currency pairs in the Indian forex market:
INR Currency Pairs:
International Currency Pairs:
Currency trading in India may provide you with attractive returns, but it also holds a high risk. When you trade in a country like India, things get much more difficult.
Aside from stringent regulatory restrictions, Indian traders have few trading possibilities. Confusion over the legality of forex trading in India might also be a barrier to entry for many potential traders.
However, it still offers the best ways to make money, but with a good market understanding and knowledge. It provides consistent profit chances across a diverse variety of currency pairs.
InvestFW‘s extensive range of educational resources is an excellent way to get started and advance your trading knowledge. Additionally, the broker allows you the benefit of practising with a demo trading account, so you get enough experience and confidence to start real trade.
What Is The Purpose Of The Forex Market?
The purpose of the forex market is to facilitate currency conversion, offer instruments to manage foreign exchange risk and allow investors to speculate in the market for profit.
What Are The Benefits of Currency Derivatives Trading?
Currency Derivatives trading help traders yield gains from the forex market by simply strategizing the investments.
How Do I Start Trading Currency in India?
To start currency trading in India, the first step is to open a trading account with the broker.
Who Are Famous Currency Traders?
Geoge Soros and Andrew Krieger are two of the most successful forex traders.
What Are The Things Needed To Start Currency Trading In India?
There are a few things required to start currency trading, including a trading account, Compliance with KYC policy, and deposition of minimum amount.
What Are The Types of Currency Market?
There are two types of currency markets in India: Spt Market and Futures Market.
What Are Currency Market Futures?
Currency futures allow traders to buy or sell a currency at a specific date in the future, at a previously fixed price.