Forex trading guide in India

Updated on Sept. 4, 2022, 1:44 p.m.

We have learned the concept of Foreign Exchange and each and every nation is connected with this phenomenon. Furthermore, after India liberalised its economy in the 90’s the concept of the Foreign Exchange is doing the round on a large scale. Let us break down the complex concept of Foreign Exchange as this is a unique process of exchanging the currency of one nation with another nation.

If you consider the case of the Free Economy, the currency of a nation is valued as per the rules of the demand and supply. The value of a currency is decided by the government of that nation. Another name for trading in the Foreign Currency is known as the Forex Trading Techniques.

Most of the participants in the markets will be the International Banks like Bank of America, Indian Overseas Bank, HDFC Bank, Axis Bank and others. A financial centre is a location dealing with various trading done with huge range of various sellers and buyers working day and night except weekends.

Central Aspect of Foreign Trade

The foreign exchange markets work through various financial establishments and works at various levels. There are many dealers entering into the markets, to undertake huge foreign exchange trading. Most of the foreign exchange dealers are the banks available in India and there is an interbank market.  Foreign Exchange is also known as Forex or FX in the financial and banking world.

Let me explain the concept of interbank markets, where in the banks exchange for various currencies. The bank can deal with a single or using various electronic foreign exchange platforms. Furthermore, the Electronic Broking Services (EBS) and the Thomson Reuters are the major competitors in the scene and has more than 1000 plus banks under its control. The currencies of developed nations will have their unique floating rates and they do not have fixed values and they tend to change from one place to another.

International Trade is a sweet combination arising out of exchange of products, good and services across the boundaries of various nations in the world. If you look at the foreign exchange analysis, a person will purchase one quantity of a currency and pay with quantity of another currency.

The foreign exchange market has begun during the 60’s and the 70’s and later onwards due to enhancement in the International Trade, it said to have reached around 8.8 trillion Dollars. Furthermore, it is highly sensitive in nature and has the highest risk exposure in the current scenarios.

To be honest the forex trade is not everybody’s cup of tea and it will be a tall mountain to climb for the beginners.

Rules by Indian Government for Forex Trade

The Indian Government has introduced various rules on undertaking the currency trading and they are given below as follows.

  • You must have reasonable funded account where cash is flowing in and out.
  • You must not risk more than 5% of the capital per trade, that means you must trade within your account size. If you do not limit your risk or keep your trading stable, you can lose all your winnings for the past month in a single trade or worse, get marginal benefits for the amount that you have invested.
  • The amount used in the transaction must not be the black money and its source must be declared.
  • You cannot do the forex trading using the online platforms and you must contact the certified forex dealers or the agencies recognised by the RBI and the Government.
  • Only the currencies like the INR/USD, INR/GBP, INR/JPY, INR/EUR, EUR/USD, GBP/USD and JPY/USD can be traded in India as per the guidelines given by the RBI.

Smart tips for forex traders

There are various step by step guidelines for the beginners willing in to invest the amount in India and they are given below as follows:

  • Open the account with a certified/recognised broker: As a trader in India willing to make presence in Forex. Most of the traders must sign up with the established broker in India like Zeroda, Angel One, Upstox, ICICI Direct, Groww, Kotak Securities and others. It is an excellent move to create a micro forex trading account with low capital requirements in the initial stage.  There are types of accounts like the Mini, Managed and the Standard Forex Accounts.
  • Effective Verification of Accounts: The traders must complete the Know Your Customers (KYC) and effectively verify the accounts in a logical manner. You need documents like the Pan Card, Aadhar Card, Passport, Driving License, 3 Months Bank Statement and Utility Bills.
  • Deposit Money: The trader must have an active account and can make the payment using the various payment methods. You must check the correct options with your prospective brokers and choose the best option.
  • Access Trading Platforms: Most of the traders in India must have the trading platforms to connect to the FX or Forex Markets. Broker offers their personalised trading platforms and you must decide whether to use this trading platform on your mobile or desktops.
  • Broker must be Recognised:  You must open the foreign exchange account with a recognised broker certified by the Government or the RBI. Trading in foreign exchange with an illegal or non-recognised broker could lead to imprisonment.
  • Start the Trade: Once everything is done, you must begin the trade, by logging on to your platforms and check the effective market situations. A good trading strategy is influenced by the authenticity of your situation and finances. Remember, the forex trading is a sensitive environment, as this deals with amount of cash you must use for trading and the amount of risk you can take without getting burned out.

Advantages of Forex trading and investment

  • You can sell your money or investment at any time.
  • All the trading is very transparent and under your control.
  • There are multiple currency options for doing the trading.
  • You will be able to earn lot of profit by doing this form of trading.

Some risks with Forex trading

  • At the snap of the finger, you can lose your money.
  • You must pay the brokerage for doing the currency trading.
  • There are multiple online fake brokers and must be very careful in selecting the brokers.

We must be very careful in handling the foreign exchange and it is fast becoming a good career option for all. It helps in earning profit; however, a person must be mentally strong to start the foreign exchange or forex trading as it can be compared to a sword with double sharp edges. You must know to attack and defend your hard-earned money.

Comments: 0

You need to Login to Post comments.