Exchange-traded Currency Derivative derives its value from an underlying asset that is listed on a trading exchange. It is also guaranteed against any default through a clearinghouse making it a safer medium. Due to its presence on a trading exchange, ETDs differ from over-the-counter OTC derivatives in terms of its highly standardized nature, higher liquidity, and ability to be traded in the secondary market.

Note should be taken of the fact that ETDs include futures contracts and also, options contracts, that is, one can use a currency future contract in the form of Exchange Traded Currency Derivative ETDs to exchange one currency for another at a future date at a price decided on the date of the purchase of the contract.

In India, such derivative contracts are used to hedge against currencies of higher value like dollar, euro, pound, and yen. Mostly used by corporations with significant exposure to imports or exports, these contracts hedge against their exposure to a certain currency. It is a settled fact that no Indian citizen, as guided by SEBI and regulated by RBI in order to minimize risk incumbent in it, can undertake forex trading inside the Indian Territory through any electronic or online forex trading platform under any circumstances.

By virtue of RBIs circular issued in , forex trading through electronic or internet trading portals has been prohibited. However, forex trading is held legal when one does it through specified foreign exchange trading platforms and the base currency is INR Indian Rupees. Simply put, the Indian Government has limited trading for Indian residents to only trade currency pairs which are bench-marked against INR Indian Rupee.

As an Indian resident, as long as you are trading through any specified Indian Brokerage allowing access to Exchanges based in India such as the NSE, BSE, MCX-SX and also provides access to currency derivatives, the transactions made for the trade is held entirely legal. Earlier, the only tradable instruments were EURINR, GBPINR, JPYINR, and USDINR. However, the Reserve Bank of India further, from 10th December onwards, allowed exchanges to offer cross-currency futures contracts and exchange-traded currency options in three more currency pairs namely, EUR-USD, GBP-USD, and USD-JPY.

At this juncture, it should be duly noted that under the Foreign Exchange Management Act FEMA , or FEMA Act, one can face imprisonment or be imposed with a fine for forex trading done illegally in India.

However, a note can be taken of the fact that there is no prohibition for NRIs to do foreign exchange trading in India. According to Investopedia, the brokers are those firms that provide traders with access to a global forum allowing them to buy and sell foreign currencies.

Transactions happening in this market are always between a pair of two different currencies which implies that forex traders either buy or sell the particular pair they want to trade. A retail forex broker or currency trading brokers are professional terms synonymous with Forex Traders. However, maximum forex broker firms indulge themselves in only a very small portion of the volume of the overall foreign exchange market whereas retail currency traders use these brokers to margin access to the hour currency market for purposes of speculative predictions.

Larger firms such as investment banks also provide Forex broker services for institutional clients. Unlike shares or commodities, forex trading does not take place as exchanges but between two parties in a direct manner, categorically, in an over-the-counter OTC market.

The said OTC market is divided into three different types viz, spot, forward and futures forex markets. Forex trading involves selling one currency in order to buy another, which is why it is quoted in pairs.

Each currency in the pair is listed as a three-letter code - formed of two letters that stand for the region and one that stands for the currency itself. Major pairs - Highly traded. Minor pairs - Less frequently traded. There are plenty of ways in which a person can trade forex by simultaneously buying one currency while selling another in the same transaction. Traditionally and for a long time now, forex trade transactions have usually been made through a forex broker.

But with the rising popularity of online trading one can easily employ the advantages of forex price movements using derivatives like CFD leveraged products, which enables a trader both, individual or institutional, to open a position for merely a fraction of the full value of the trade trading.

Although the leveraged products can boost the profits, they can also magnify losses if the market moves against you which is why CFD trading is illegal in India. Given its liquidity in terms of daily trading volume, losing money is easier than actually making it. Following are some of the strategies generally employed to the cause -. Price Action Strategy - The price action strategy is the most commonly employed strategy for Forex trading. It completely depends on the bulls or bears of the price action in currency trading and is typically useful in all kinds of market conditions.

Trend Trading - In this type of strategy, the traders need to identify the movement whether upward or downward of the currency price on the basis of which they need to decide on their entry point. Online tools such as moving average, stochastic, relative strength indicators, etc, are also available to aid the traders for the analysis. Counter Trend Trading - In this strategy, a trade is made against the current trend with pure hopes of making small gains and is dependent on the prediction that the trend will reverse.

Range Trading - In a range trading strategy, the trade is made in a specific range of currency prices and are needed to identify the favorable price conditions in which they can trade where the price levels are usually dependent on the demand and supply for the currencies.

Breakout Trading - In this type of trading, a trader enters into the market at that point when the market is emerging out of a previous trading range, i. e, a breakout. Position Trading - Position trading is used by the seasoned veteran traders mostly and involves analyzing the charts at the end of the day.

One needs to have a strong grasp over the fundamentals of the market to master this strategy. Carry Trade - The focus in the carry trade strategy is on the interest rate differential of the two countries whose currency is being traded. This involves selling out that currency which has a low-interest rate and buying the one which has a higher interest rate and hence is considered a rather successful strategy if executed properly. Any Indian, residing in the territory of the nation, or a company including banks and other financial institutions can participate in the futures market.

However, Foreign Institutional Investors FIIs and Non-Resident Indians NRIs are prohibited from participating in the currency futures market. As mentioned earlier, the Securities and Exchange Board of India SEBI has launched cross-currency futures. The options have now opened up in euro-dollar, pound-dollar, and dollar-yen EUR-USD, GBP-USD, and USD-JPY.

The foreign exchange market came into existence in India by as late as when the banks were granted permission to undertake trading in currencies by the RBI. Indian foreign exchange market as it exists today is well structured and conducted in a regulated-fashion by the RBI. The dealers authorized by the RBI can engage in such transactions.

The forward market is active for a maximum period of six months in the Indian territory. In recent years, the maturity profile of the forward market has elongated, the credit of which goes mainly to the RBI initiatives. The link between the forward premia and interest rate differential appears to work largely through the leads and lags and it can be observed that the forward markets are also influenced by importers and exporters through a grant of credit to overseas parties.

Following chart can be referred to understand the time-zone division of the Foreign Exchange Market abbreviated as a Forex market:.

Even though a hour market offers a substantial advantage for many individual and institutional traders, it is not deprived of certain pitfalls. Discussing one of which is that to monitor a position for such long periods of time is highly painstaking and near impossible for any trader which implies that there will certainly be trading times when opportunities are missed.

What can be even worse is the situation when a jump in market volatility leads the spot to move against a set position. For reducing such a risk, a trader has to be vigilant and categorically aware of when the market is most volatile, and decide what times are best for his trading pattern accordingly. One of the greatest characteristics, or rather advantage, of the foreign exchange market, is that it opens for 24 hours a day enabling the investors to trade during as well as after normal business hours or also after work.

One can even do the deed by night! However, not all time-zones can be treated equally as there are times when price action is consistently volatile, and also when it is completely muted. It can be concluded as a major observation that major trading sessions in Forex are directly interconnected with market hours.

Being a market with high liquidity, the chances to earn a profit is as slim as suffering a loss not only in India but anywhere in the whole wide world.

With the right skill set and command over the fundamentals, one needs to learn all the tricks of this trade. Gambling is where you essentially and categorically depend on pure luck! Going by this standard, Forex trading cannot be considered gambling. It is a high risk-based process, where a trader tries to earn a profit by predicting the movement of the market. As mentioned earlier, only the following currency pairs can be traded in India -. Section 13 of the FEMA states that the punishments in the contravention of the Act can result in the penalties as well as imprisonment under the Act.

General Legal. What Is Forex Trading and how to trade forex in India? Seeking answers to what is currency trading in India? Or confused about how to carry forex trading legally in India? All of the platforms enable complex charting tools and provide access to a variety of technical indicators, with the unique desktop platform providing access to over indicators. The research area of InvestBy is run by an in-house team of professionals who produce well-written and practical market assessments.

InvestFW is a popular CFD and Forex broker that is best known for offering best-in-class trading services to its clients. The brokerage platform offers to trade in popular financial instruments, including Forex, Cryptocurrencies, Commodities, Stocks, Indices, etc. Apart from this, InvestFW provides the best user experience to its clients by offering them advanced trading platforms, a set of advanced trading tools, excellent customer support, and rich educational material.

Capitalix is a multi-award winner CFD and Forex broker, offering top-class services to traders across the globe. Additionally, the broker is well regulated by Seychelles Financial Services Authority FSA , making it a safe platform to trade with.

The popular financial markets available on the platform, include Forex, Commodities, Cryptocurrencies, Stocks, Precious Metals, and Indices. Meanwhile, the broker also offers powerful and intuitive trading platforms for both beginner and professional traders with an advanced mobile application. Overall, Capitalix is the best broker in every aspect. PrimeFin has a large FX market, a typical CFD market, and some cryptocurrencies such as Bitcoin, Ethereum, and others. In other words, there are no inactivity or withdrawal costs charged by the broker.

PrimeFin also charges currency and non-trading fees, but these are minimal when compared to other Indian brokers. Olymp Trade is an IFC member that assists you in trading commodities, equities, indices, ETFs, currencies, and crypto-assets.

With Olymp trade broker, you can trade with up to times leverage. eToro offers various account types, each with different spreads and fees. The eToro Account gives you access to fixed spreads over all currency pairs, as well as CFDs on cryptocurrency, indices, stocks, bonds, and commodities.

Except for those that specialise in arbitrage, eToro accepts MetaTrader EAs and its own platform cTrader. Regular trading and non-trading fees are available from this broker. There is no charge for withdrawals. There are no assured stop losses or discount offers offered by eToro. It is one of the best brokers for copy trading. Furthermore, there is no requirement for a minimum deposit. Clients can use a credit or debit card or a bank wire transfer to withdraw their funds.

An eToro account can be opened quickly and easily, and the customer care team offers useful advice in a variety of languages via phone, email, and live chat. Pepperstone is an Australian forex broker that also offers a variety of CFDs. Pepperstone is one of the top forex brokers in the world outside of India. Clients of the Australian firm will benefit from low average spreads and competitive commissions.

There is no charge on deposits or withdrawals, not to mention an award-winning customer care team. If you wish to trade FX legally in India, you must open a trading account with any India-based broker who is fully licensed by the government exchanges. The Reserve Bank of India RBI loosened the requirements, allowing traders to exchange a few new currency pairs. The current currency trading environment in India still needs some oomph. Although each country has its own official currency, only a few nations actively trade in FX markets.

In India, you can easily exchange them lawfully. The demand for highly liquid currencies from industrialized countries that are politically stable, such as the USD, the Swiss Franc, and the Japanese yen, is constantly strong. Depending on the announcement and the state of the country, the currency can experience significant changes, resulting in substantial gains or losses.

The economic indicators listed below are generally thought to have the biggest impact on the currency for Forex trading in India. A big increase in employment indicates that the economy of the country is prospering, which can be beneficial. While decreases are a hint of likely contraction, the data could lead to currency depreciation.

The circumstances that exist at the moment the data is released frequently influence economic data and currency movement. Substantial financial flows between countries are created by exports and imports, which have a significant impact on the value of respective currencies. Because it will have to buy foreign currency by selling its own, a country with more imports than exports will see its currency fall.

The Gross Domestic Product GDP is a metric used to assess the economic health of a country. The stronger a country is, the much more foreign direct investment it attracts, resulting in a currency value increase. Price increases are indicators of inflation, which causes the home currency to decline. Higher interest rates attract foreign investment, raising the value of the domestic currency.

According to Indian central bank regulation, transferring funds to a foreign broker is prohibited. Failure to follow this law could lead to harsh penalties, such as expensive fines and imprisonment. As a result, you must only trade with state-regulated brokers if you are an Indian citizen.

You can begin forex trading in India with Investby, a premier award-winning forex broker. Trading View. Top Brokers. Our in-depth and unbiased reviews help investors in choosing the best broker according to their investing needs. Search for: Search Button. Home Safe Online Brokers Avoid Forex Fraud Forex Brokers to Avoid Complain About a Broker News Articles Contact Advertise With Us Menu. Breaking News. How To Start Forex Trading In India ? Table of Contents.

Regulations on Forex Trading? How to start Forex Trading in India? How Does Forex Trading Work? Is Forex Trading Illegal in India?

Forex trading in India cannot be done at any land-based location as the only online forex trading is available. Unlike the stock market which has opening and closing times, the forex market remains open throughout the day as traders trade currencies across all time zones, five days of the week. Traders buy and sell currencies at the current price in the spot market. ETFs function just like stocks. This means that traders can purchase and trade ETFs just like stocks.

To put it very briefly, futures refer to contracts to purchase or sell currencies on a date in the future at a pre-determined price. Futures contract trading is done on centralized exchanges. Since they are standardized, the futures market is well-regulated and transparent. You can easily gain access to the transaction details and the price. Since most top-rated online Forex brokers offer several currency pairs, you can easily decide which currency pair you would like to trade.

Right at the beginning, you should implement risk management techniques. We suggest that you first gain a thorough understanding of the price volatility associated with your selected currency pair. We discussed the different ways to trade Forex in the above section. Forex brokers offer all or more of the above-mentioned types of trading. The amount you have to invest depends on the type of trade you select.

Once of the currencies in your currency pair is a base currency and the other is a quote currency. The currency to the left is the base currency and the currency to the right is the quote currency.

If you feel that the base currency will become more valuable than the quote currency, you have to buy. If you feel that the value of the base currency will fall, you have to sell. You can also add orders to your trade. These orders include limit orders and stop orders, which help you to minimize risks and lock in profits whenever your loss or profit targets have been met. You do not have to add orders to your trade, but experts highly recommend that you do in order to minimize your risks and protect your profits from market volatility.

Stop loss orders enable you to exit a trade automatically if the price worsens and thus minimize your loss. Limit orders enable you to exit trades automatically if the price gets better and thus lock in your profits.

To close your trade, you have to perform an action that is opposite to the action you performed while opening the trade. For example, if you opened a trade by purchasing three CFDs, you have to sell three CFDs to close it.

When you close your trade, your profit and loss will immediately reflect in your balance. To get started with Forex trading, you must sign up with an online Forex broker.

If you are a beginner to Forex trading in India, you will find it very difficult to identify a reputed online Forex broker on your own. This is where we can help you. We have invested a great deal of time and energy in identifying, reviewing, and rating the best online Forex brokers in the industry.

We suggest you go through our reviews and choose one of the online Forex brokers in our list to get started. Once you have chosen your Forex broker, get started with a demo account. A demo account serves as a teaching tool for beginners to trading. You can use it to understand trading better. And once you gain the confidence you require to trade for real, you can open a live account. Now is the time to deposit a small amount of money into your account.

Avoid spending a huge amount of money to begin with. Instead, spend more time in getting educated at the online Forex broker. All the brokers we recommend to Indian traders offer free educational material in the form of video tutorials, one-to-one training, high-quality articles, free eBooks, webinars, and others. Use these free resources to gain a deeper and better understanding of Forex trading. We never select Forex brokers for Indian traders at random. Instead, we spend a lot of time in researching each broker before reviewing it and recommending it for Forex traders in India.

Indians can trade Forex with the Indian exchanges NSE, MCX-SX, and BSE. This means that, if you stick to Indian exchanges, you do not get access to a wide range of currency pairs. India sees the decentralized global Forex market as a threat to its sovereignty.

For this reason, the government of India has limited Forex trading to a great extent. Trading on other currency pairs, except those permitted by the RBI, is, therefore, illegal in India. In fact, it is a non-bailable offence. The first step would be to create an account with a Forex broker who has received a license from the Securities Exchange Board of India SEBI. You can open a personal account or a business account. And having opened an account, you can go ahead, and trade currency pairs permitted by the RBI.

If you are still confused about the legalities of Forex trading in India, we suggest talking to a lawyer who understands such matters and can guide you better. You should never trade currency pairs without first learning how to manage the various risks associated with Forex trading. Needless to say, you want to trade Forex because you want to make a profit. And if you want to make a profit, you must understand the basics of risk management. Most traders plunge headlong into Forex trading without learning how to handle potential losses.

Now that you understand more about Forex trading in India and the various restrictions associated with it, we suggest that you get started. Check out our reviews of top online Forex brokers such as IQ Option and Olymp Trade.

We recommend getting started with a demo account. Spend several weeks just learning about Forex trading before you start investing money in it. Once you gain some confidence, go ahead and start trading. Different Ways to Trade Forex Brief Guide to Trading Forex Step 1: Select a Currency Pair.

Step 2: Choose a Way to Trade Forex Step 3: Decide Whether You Would Like to Buy or Sell. Step 4: Add Orders to Your Trade Step 5: Close Your Trade Getting Started How We Choose Forex Brokers Is Forex Trading Legal in India? Forex Trading Risks — How to Understand and Manage Risks Conclusion.

Cross Currency Exchange As mentioned earlier, the Securities and Exchange Board of India SEBI has launched cross-currency futures. InvestFW Review TradeEU. Click here to Register today to Start your 3-Day FREE Trail. Limit orders enable you to exit trades automatically if the price gets better and thus lock in your profits. Unlike the stock market which has opening and closing times, the forex market remains open throughout the day as traders trade currencies across all time zones, five days of the week.

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