How To Do Forex Trading In India

Summary:

Discover how to do forex trading in India. This guide covers all traders need to know to start trading and choosing regulated broker.

If you are wondering how to do forex trading in India, this guide is for you. We will begin by explaining what forex trading is. We will then examine why people trade forex in India and where it can be done. You will learn who is eligible to trade forex in India. We will also discuss the best time to trade. A step-by-step process will guide you through the process of forex trading in India. Finally, we will highlight all the key risks associated with forex trading to avoid them.

What is Forex Trading?

Forex trading is the process of buying one currency and selling another in the global foreign exchange market. It takes place electronically over the counter (OTC). The main goal is to profit from the fluctuations in exchange rates.

Currencies are traded in pairs, such as EUR/USD. The forex market includes individual investors, companies, and banks with around $6.6 trillion worth of transactions taking place each day. This makes the foreign exchange market one of the most liquid and active markets in the world.

Main Concepts Every Forex Trader Should Know:

Currency Pairs: In forex, currencies are traded in pairs such as EUR/USD. The first currency is the base currency, and the second is the quote currency. The price shows how much of the quote currency is needed to buy one unit of the base currency.
Pips: A pip (percentage in points) is the smallest unit of price movement in a currency pair, usually the 4th decimal place (0.0001). It helps measure gains or losses in trades.
Leverage: Leverage allows traders to control a larger position with a smaller amount of capital. For example, with 1:100 leverage, $100 can control $10,000 worth of trades. While it can increase profits, it also increases risks.

Why Trade Forex in India?

Trading forex is legal in India, which gives you the opportunity to find a reputable and regulated forex broker to access global currencies. You can benefit from market privileges such as high liquidity, offering several investment opportunities. The forex market is also flexible, as it opens 24 hours a day, five days a week, allowing traders to choose sessions that fit their schedule. Additionally, traders can open large positions with relatively small capital using leverage. Moreover, there are diverse trading options, including major, minor, and cross currency pairs.

Risks to be aware of:

Regulatory Risks: In India, the Securities and Exchange Board of India (SEBI) restricts forex trading to certain currency pairs. Trading outside approved channels can be illegal.
Risks associated with high leverage: leverage can amplify losses as well as profits.
While market volatility provides several investment opportunities, it can also be risky due to high sensitivity to global events, making the market fast-changing and unpredictable. This could lead to unexpected reversals against your open positions.
Make sure that you choose a regulated broker, as many traders fall into the traps set by unlicensed brokers.

Who Can Do Forex Trading in India?

Resident Indians can trade forex only in indian Rupee, INR-based currency pairs such as USD/INR on SEBI-regulated Indian Brokers. This is not on offshore platforms or with non-INR currency pairs like EUR/USD.
NRIs (Non-Resident Indians) can trade forex under specific RBI guidelines and need to follow FEMA regulations.
Banks, corporates, and financial institutions can trade forex for hedging and operational purposes.

Key Requirements Indian Traders Should Know:

As an indian trader, you must complete KYC verification before opening an account.
The documents required include proof of identity, proof of address, and PAN card.
The initial deposit is required to start your trading journey.

Worth noting that trading in forex outside the permitted currency pairs is illegal in India. You must ensure that you are trading through a SEBI-approved broker to stay compliant.

When Is The Best Time To Trade Forex in India?

The forex market is open 24 hours a day, five days a week. This is because forex trading happens globally across different time zones. The market trading sessions of major financial centers:

Sydney Session: 3:30 AM – 12:30 PM IST.
Tokyo Session: 5:30 AM-2:30 PM IST.
London Session: 1:30 PM- 10:30 PM IST.
New York Session: 6:30 PM – 3:30 AM IST.

Overlap periods can be one of the best times to trade forex due to high liquidity and volatility, offering more trading opportunities. These periods occur when two major forex sessions are open at the same time:

London-New York Overlap: 6:30 pm – 10:30 pm IST. (High Volatility)
Tokyo-London Overlap: 1:30 pm- 2:30 pm IST. (Moderate Volatility)
Sydney- Tokyo Overlap: 5:30 am – 12:30 pm IST (lower Volatility)

Now that you understand what the forex trading market is, why to choose it, who can trade in it, and the best times to trade, it’s time to learn how to do forex trading in India step by step.