Forex Trading In India: All You Need To Know

Personal Finance

Do you wish to trade in foreign currencies at any time of the day? With forex trading in India, you can make this happen.

Foreign Exchange or Forex Trading is the trading and exchange of foreign currencies. Simply put, a person buys a currency by exchanging another currency as per the ongoing currency rate. Here, a single currency is considered a market, like the INR or USD market. Over-the-counter, trading is done, which means both parties trade with each other without needing an agent or intermediary.

Continue reading to learn more about the forex trading domain.

Sections Of Forex Trading Markets In India 

There are two market sections for forex trading in India:

  • Interbank Forex Trading Market: This is a group of banks and companies doing currency trading. Interbank transfers make up most of the forex market. This trading helps the most to keep the exchange rates stable.
  • Retail Forex Trading Market: This section has many traders that engage in forex trading in India. However, their transactions are not as high as those on the interbank market.

Types of Forex Trading Market

  • Spot Market: This market is the most active in forex trading. It eases quick currency transactions.
  • Forward Market: This market helps two parties to agree to buy or sell a currency at a future fixed date. On the date of trading, there is no exchange. Most traders use it to hedge their forex trading transactions.

Objectives of the Forex Trading Market

The two objectives with which traders enter currency trading in India are listed below:

  • To protect investors from market volatility, currency trading acts as a vast hedging tool. It allows fixing a specific rate at which one can enter the contract and then honor the same, not considering the market rates at that time.
  • Many traders enjoy investing in the forex market as they make huge profits based on their estimates or guesses about the currency trading markets. They try to use market volatility for their profits. Forex trading also has a high risk, so it is better to be cautious while trading in this market.

Forex Trading Strategies

It is always better to have a strategy in place when dealing with currency trading in India. The different types of trading involved in forex trading in India are listed below:

  • Scalp trading: It is done during the busiest time of the day and with very liquid currency pairs. This type of trading involves profiting from small changes in the price. So, scalp trading provides more profit.
  • Day trading: It needs proper knowledge and technical analysis skills as the traders exit the trading within the same day. 
  • Swing trading: It lasts for more than a day, even weeks. In this type of trading, traders take the currency changes into account. 
  • Position trading: It is done for months or even years. Here, basic analysis is a must for the trader to keep the holdings for a long period.

Start Forex Trading Today

Follow these simple steps to start forex trading:

  1. Gain insight about Forex: If you are new to currency trading in India, you must know properly about it. This form of trading has a high risk involved. Thus, poor research or knowledge can land you in trouble or at a loss.
  2. Open a brokerage account: Open a forex trading account with a broker to start trading. The brokers here do not charge commissions of any sort. The capital needs of the brokerage account can be changed.
  3. Choose a trading strategy: Different traders can have different trading strategies. So, choosing the right trading way is vital after a depth analysis. 
  4. Keep a check: As a trader, it is vital to have an idea of your positions and holdings at the end of the day. Since the forex market works 24 hours daily, trading can be done anytime. 
  5. Do not get emotionally driven: A beginner in Forex Trading may get to see many ups and downs due to volatility. You should not lose hope and keep trying with more effort and research.

Forex Trading Regulations in India

The firms in India follow the Foreign Exchange Management Act of 1999. These firms are managed by the Securities and Exchange Board of India (SEBI), and the transactions are monitored and regulated by the Reserve Bank of India (RBI). A broker must be registered with SEBI. However, trading on contracts for differences and binary trading is not allowed in India.

Final Thoughts 

Forex trading is a high-risk, high-return marketplace. Due to severe fluctuations in the exchange rates, foreign trade can either give good returns or cause monetary losses. Currency trading in India can be done on the Bombay Stock Exchange (BSE), National Stock Exchange (NSE), and Metropolitan Stock Exchange. Forex markets allow the use of leverage and, with that, provide good profits. This will also help people who do not have much to provide as capital. This market is one of the most liquid in the world, with meager transaction costs. However, choosing a good and safe broker is a vital part that is to be kept in mind.

To expand your knowledge by reading more such articles, visit Piramal Finance. Learn more about easy business and personal loan solutions and other financial services with us.