How to Invest in Forex in India

Are you interested in learning more about what currency trading in India entails? Or do you need information on how to legally exchange currencies in India? In actuality, the foreign exchange market is the largest decentralised global market for currency transactions.

The most active currency exchange market in the world is India, however the majority of people are still unsure about the legality of forex trading in India. As a result, we are now providing you with information about forex trading in India.

What Is Forex Trading? 

The decentralised, global market known as Forex (FX), sometimes known as foreign exchange or currency trading, is where all of the various currencies of various economies are bought and sold. The FX market is the biggest and most liquid market in the world.

Do you know what is Forex factory?

How is Forex Trading done in India?

The global stock market is nowhere near this, with an average daily trading volume of $5 trillion. Simply put, currency trading is the act of purchasing and selling, and if you've ever been abroad, you've already engaged in some currency trading.

For instance, if you converted your rupees (INC) into euros before travelling to France, the amount of euros you received for your rupees depended on the current FX exchange rate between the two currencies, which was dependent on supply and demand.

Additionally, because the currency rate is so volatile and liquid, comprehending it demands both financial talents and thorough knowledge of the market-based trading system.

What is Currency Trading?

The act of purchasing and selling currencies with the express intention of making money is known as currency trading, also referred to as foreign exchange or Forex. Additionally, it is known as speculative Forex trading. Finally, while the terms currency trading and forex are generally equivalent, the former is carried out with the aim of profiting from the transaction.

Why do we have Exchange Traded Currency Derivatives?

Exchange-traded derivatives are financial contracts that are registered and traded on regulated exchanges. Simply put, these are the derivatives that are traded in regulated markets. Currency traded on exchange A trading exchange-listed underlying asset serves as the basis for the value of a derivative. Because it is secured against any default by a clearinghouse, it is a safer medium.

Due to their listing on a trading exchange, ETDs are different from over-the-counter (OTC) derivatives in terms of their highly standardised nature, greater liquidity, and capability for secondary market trading.

The fact that ETDs include both futures and options contracts must be kept in mind, meaning that one can utilise an ETD to swap one currency for another at a later time at a price determined on the day the ETD was purchased.

Such derivative contracts are utilised in India as a form of insurance against higher value currencies like the dollar, euro, pound, and yen. These contracts serve as a hedge against exposure to a certain currency and are typically utilised by firms with sizable import or export exposure. 

Is Forex Trading In India Legal?

It is a well-known fact that an Indian citizen is not permitted to use any electronic or online forex trading platform inside Indian territory. This complies with RBI laws and SEBI guidelines intended to lower the risk.

In a 2013 circular, the RBI forbade currency trading through electronic or internet trading platforms. However, forex trading is regarded as legal when carried out through specific foreign exchange trading platforms and using INR as the base currency.

The Indian Government has restricted trading for Indian citizens to just currency pairs that are directly compared against the INR, to put it simply (Indian Rupee).

Strategies for Forex Trading in India 

Because of liquidity in terms of daily trading volume, one can easily lose money. Here are some strategies frequently employed to further the cause: 

Price Action Strategy  

The price action technique is the one that is most frequently utilised while trading forex. It typically proves useful in all market circumstances and is entirely reliant on the bulls or bears of the price action in currency trading.

Trend Trading 

In this kind of strategy, the traders must determine the direction of the currency price movement (upward or downward) in order to choose their entry point. 

Counter Trend Trading 

This approach relies on the assumption that the trend will change and involves trading against the present trend in the hopes of earning only modest profits.

Breakout Trading 

When engaging in this style of trading, a trader joins the market when it is breaking out of a previous trading range, or a breakout.

Bottom Line

A unique market exists in currency trading where all types of investors can profit. Scalping, day trading, and long-term positions are all viable ways to generate income. A fundamental analyst or a technical analyst are both possible.