How to Start Forex Trading in India?
More On Currency Trading
Currency trading, one of the investment products, comes up with the great potential of high returns, but to get into it, is essential to know how to start forex trading in India?
Currency trading exchange allows traders to trade with foreign currencies, giving you the chance to earn profit by grabbing the right opportunity.
Before moving ahead with getting into the forex trading, it is good to understand what currency trading is?
Currency trading involves traders from around the world. The underlying principle of currency trading is that the values of different countries’ currencies keep changing with everyday events happening across the globe.
It generally involves banks, corporations, central banks, hedge funds, retail forex brokers, and high returns to traders.
In case you are looking to start forex trading, you need to know that the foreign exchange market is the largest in the world where currencies of all countries are traded.
However, it was not very popular in India.
Earlier, only financial institutions and corporates could engage in currency trading, but things are changing fast here.
Now, small-scale investors and even individuals are trading in currency markets.
Suppose one can form an educated opinion about the forthcoming fluctuations in currencies concerning each other and wants to gain profits based on it. In that case, she/he should consider starting currency trading in Indian markets.
If the decision to start forex trading has been made based on knowledge, experience, and inclination, the following aspects need to be considered and taken care of.
How to Start Forex Trading?
As already discussed, forex trading involves buying and selling of currency pairs or derivatives such as futures and options.
Although it is similar to equity trading, it is good to understand a few basics and concepts to grab a good experience.
Again, to move ahead with currency trading, one has to open a currency trading account. There are many brokers offering the platform to do currency trade conveniently.
To open the account, look for the broker offering services at the least brokerage. You can go for the full-service stockbroker if you want some kind of assistance in research and recommendation, following which can help you to earn good returns and profit.
On the other side, there are discount brokers offering brokerage services at the minimum services. However, they do not provide any kind of research ideas and tips for trading.
How to Start Forex Trading Online?
To get into the forex trading, one has to open a trading account with the top broker. It is good to invest enough time in research to find a broker offering decent services.
To open the currency trading account, visit the broker website, and apply either online or offline.
- Fill the form and upload or attach important documents like
- ID proof (PAN card, Voter’s ID Card, Driving License, Aadhaar Card)
- Address Proof (Telephone Bill, Utility Bill, Ration Card, Registered Lease or sales agreement, Income Proof (current ITR, salary slip, Form-16, account statement, etc.).
- Post this; the account is details are verified on call or by the visit.
- On in-person verification, your account opens, the confirmation email is then sent to your registered email address.
- The mail contains your login id and password that you can use to access your trading account.
Forex Trading Platforms
After opening an account with a broker, you would be able to access the trading platform that further helps you trade seamlessly.
In the trading platform, you can do the proper and detailed analysis, like understanding charts. So for this, choose the currency pair in which you want to trade.
In general, the trader considers the OHLC and Candlestick Charts that help you understand the pair’s price movement.
Next, you can use indicators like MACD to the chart to decide your forex trading. This provides you with the information on moving averages of the stock at that particular time.
After analyzing the pair and its price movement, you can move ahead with the order’s placement.
Currency Trading Order Types
To trade in currency, you are provided with different types of order like:
- Market Order or Limit Order
It is the type of order that you can use to open a new long or short position. In the market order, you can take a position at the current exchange rate. Your order is executed immediately.
For example, the bid price of EUR/INR is 1.2140, and the asking price is 1.2142. If you want to buy this currency pair at this current price, it would be sold to you.
On the other hand, the limit order gives you the chance to set your preferred price to trade, and the order is executed only when your desired value is reached.
You can place a buy limit to buy at or below the specified price and a sell limit order at the specified price or above.
- Stop Entry Order
A stop order is another order type in which the order is executed only when the price reaches a stop price.
In this, you can place a buy order only when the price rises to the stop price and continue to grow and sell when the price falls to the stop price and continue to fall further.
For example, the GBP/INR is trading at 1.5050 and is increasing continuously; then, you can use your belief to set the stop entry order at 1.5060 and thus buy it once its price reaches 1.5060.
To limit your losses in currency trade, you are provided with the stop-loss order. In the case of a long position, you can sell a STOP order, while you can buy stop order in a short position.
For example, you buy EUR/INR at 1.2230, but to limit your loss, you set the stop loss at 1.2200. Thus, in case the market reverses its trend in that case as the value reaches 1.2200, the order gets executed automatically, thus preventing you from facing huge losses.
Another essential type of order type that can help you stay away from facing huge losses is the market trend reverses.
For example, you decided to go short in USD/INR at 90.80, using the trailing stop of 20, this means that as per the current price, your stop-loss is 91.00, but if the price goes down and hits 90.60, then the stop loss will move down to 90.80.
Currency Derivatives Trading in India
A few years back, currency trading was not allowed in India. On 29th August 2008, NSE got approval from SEBI for setting up the currency trading platform.
Initially, Currency Futures on USD-INR was introduced, and later the Indian rupee was allowed to trade against different currencies like the euro, pound, sterling, and the Japnese Yen
Later, Currency Options was introduced on February 27, 2018, that allows trade Indian rupee to trade against Euro, GBP, JPY.
On the one hand, where futures trading involves the obligation to buy or sell a particular asset at a set point in the future, the options contract is where you get the right but not the obligation to trade in a specific currency pair.
Since derivatives trading is a bit complex, it is good to understand its basics before getting into the trade.
Forex Trading Margin
Before you start currency trading, you will have to deposit requisite margin money in your trading account. Generally, the margin requirement is 5% of the contract value, but this may be changed sometimes due to market volatility.
There are some things that one needs to know before starting to trade in currencies like:
- Trading in currency on the National Stock Exchange (NSE) can be done from Monday to Friday between 9:00 am – 5:00 pm.
- The lot size for futures is 1000 per unit except for the JPY / INR pair, where the lot size is 100000 units.
- The four major currency pairs traded in India are USD – INR, EUR – INR, GBP – INR, and JPY – INR. USD / INR is the most popular and liquid currency pair in India, followed by GBP / INR.
After knowing the basics, let us understand how to start forex trading with the help of an example:
Suppose one is bullish on EUR and anticipating the value of EUR to increase with respect to INR, then, he will buy futures of EUR / INR.
Similarly, if one is bearish on EUR and anticipates EUR’s value to decrease with respect to INR, he will sell EUR / INR.
A lot of beginner level traders assume currency trading in India is similar to Forex trading.
This is a total misconception. In India, currency trading is allowed only under the rules laid out by SEBI and can only be done through Indian stockbrokers.
Forex trading, as such, is not regulated by SEBI or any regulatory body in India. In fact, it is actually not completely legal to indulge in Forex trading.
How to Start Forex Trading without Investment?
As already discussed you can start forex trading by opening an account. Once the account opens, the broker ask you to deposit some amount in your trading account.
This amount is used to start forex trade and if you trade successfully, then you can withdraw the profit. Thus, there is no requirement to invest additional sum to trade in currency pair.
The minimum deposit in the trading account ranges from ₹10,000- ₹2,00,000. You can start with the minimum amount and earn high returns on your investment.
Minimum Amount to Start Forex Trading in India
The forex market comes up with many benefits, and you can start forex trading immediately after opening the currency trading account with the reputed broker.
Many brokers offer the account for free. Thus, you do not have to pay any charges to get started.
Also, it does not demand any initial or minimum balance to start forex trading. Again, like another trading, you can trade in currency with the least amount you have.
But before investing even with the least amount, it is necessary to consider some of the risks involved in forex trading.
- Risk Management
Start with the least and, in general, follow the 1% rule. For example, if there is ₹1,00,000 in your account, then you can take a risk on the trade is ₹10,000. This will help you to manage the risk of loss.
- Understanding Bid, Ask, and Pips
If you are new in currency trading, it could not be very clear at the beginner level. There are many different terms used explicitly for the currency trade, like Quote Price.
It is a pair of currency, where the value of one currency in the pair is reflected through the value of another currency.
For example, for the currency pair, USD/INR is 1.2983, then here Ind is the base currency while the USD is the quote currency.
Here 1 USD is equal to 1.2983 INR
- Bid & Ask
Bid or Buy price and Ask or Sell Price is used in reference to the base currency.
When buying a currency pair, the ask price is the amount of the quoted currency that you have to pay to buy the base currency, while the Ask price is the price at which you want to sell one unit of the base currency.
- Spread & Pip
Here, the spread is the difference between the ask and bid price, and Pip is the smallest amount that can move in any currency quote.
Knowing these terms and understanding the concept of currency trading, you can start and earn profit with the trade right away.
How to Start Forex Trading without a Broker?
When it comes to trading, broker services hit the mind, but if you are interested in forex trading then you can move ahead even without a broker.
Although, it sounds strange to many, but a currency trade hardly involves the role of broker.
So, wondering how to trade in forex without a broker. Well, you can do it easily by visiting the financial institution like bank that provide the currency exchange services.
For this, check the currency market quote and follow the right procedure to convert one currency to another to earn a good profit.
There is another way called ETF that helps you to trade in forex without a broker.
For example, you borrow 1000 Yen for one year, you can either use this currency either to buy higher interest rate currency to earn profit from the difference in rates or can wait till you get a good value.
Learning the basics and starting trading in currency strategically right from the beginning can help you to earn good returns over time.
What is more essential is to invest time in finding the right stockbroker offering decent services at the minimum brokerage charges.
You can also look for the trading platforms and apps provided by the broker that further helps you to trade without any hassle.
Learn how to understand charts and use indicators to do a proper analysis especially if you are into intraday trading.
For more information, you can check the Currency Trading Basics.
In case you are looking to start currency trading, fill in some basic details in the form below, and a callback will be arranged for you:
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