How to start forex trading in India

Why Forex Trading Is Popular In india?

Forex trading is not entirely legal in India. You are only allowed to trade currency pairs that include the Indian Rupee . The primary reason behind this restriction is that the INR is weak against the U.S. dollar . Traders from India who want to buy the USD have to purchase it from the Central Bank of India. 

As a citizen of India, you can trade forex on the National Stock Exchange , Bombay Stock Exchange and Metropolitan Stock Exchange . Established in 1992, the Securities and exchange board of india was set up to monitor and regulate forex activity in India. It is an autonomous authority that protects forex securities issuers, investors and forex-related agencies. Forex brokers and stock exchanges must be licensed by SEBI to operate within India.  

Steps to start trading forex in india for beginners:

  1. Learn the basics of Forex Trading
  2. Learn about the different Currency pairs
  3. Choose a broker & open your Forex Trading Account 
  4. Learn the different Forex Trading Strategies

Learn the basics of Forex Trading

What is Forex Market?

Forex refers to Foreign Exchange , or simply FX , sometimes even called Spot FX, where the global currencies are traded against each other.

You may have seen ticker symbols of currencies like USD/INR , EUR/INR etc. while visiting your bank. These are the rates of the currencies from the live Forex market.

Forex is the most liquid market in the world, operating 24 hours a day, nearly five and a half days in a week. The global daily average trading volume of this market is over $6.5 Trillion, making it the largest financial market in the world. The number is so big that a big Stock exchange like a New York Stock Exchange (NYSE) has to operate for about a month just to catch-up to the Forex market’s daily average volume.

Forex Trading

Have you travelled abroad to another country?

If you been to a foreign country, then it is likely that you may have converted your local currency i.e.Indian rupee (INR) to another currency like Euro or a US Dollar. If you exchanged your currency before, then you have already traded in the forex market.

Let's assume that you exchange INR 15,000 for $1000 through your bank or local regulated exchanger, for traveling abroad to US. In this example, you would be physically selling your home currency ( Indian rupee ) for buying US Dollar. When you are exchanging your money for traveling abroad, you (through your bank) are making a forex transaction in the global forex market without even knowing

Learn about the different Currency pairs

What are Currency Pairs?

Currency Pair is the quote of one currency relative to the other currency. In the Forex market, all currency are traded against each other, therefore being called 'currency pairs'. So when you are trading in the forex market you are actually trading 2 currencies simultaneously.

Currency Pair Terms:

1) Base & Quote Currency: In every currency pair like EUR/USD, USD/INR, the first currency mentioned is the ‘Base Currency’ which is being compared to the second currency called ‘Quote Currency’.

2) Bid & Ask prices: 'Bid price' is the market price at which you can sell the base currency. And 'Ask price' is the price at which you can buy the base currency in the pair.

3) Spread: Spread is the difference between the ask and the bid price. This is the fees charged by the forex brokers for each trade trade, and it depends on the market liquidity, and the currency pair that you are trading. The lower the spread, the better it is for you.

4) Pips: Pip stands for Percentage in Point, and it is the most common term in forex trading. Simply put, 1 pip is the smallest measure at which the market moves. It is normally the change/fluctuation in points of the last decimal for a currency pair.

Choose a broker & open your Forex Trading Account 

1- Open Trading Account with a Regulated Forex Broker

The first step to start trading forex is to choose a reputed & regulated forex broker, and then open an account with it. Choosing a 'good' broker is an important step because the broker plays a pivotal role in your trade.

Top 5 Forex Brokers in India

Here are the April 2021 best forex brokers in india by forex trading category

1.FXTM 

We have made FXTM our top-rated broker because in addition to its lengthy track record, it enjoys a very high level of regulation and reputation, and it offers a highly competitive fee structure which tends to keep down the cost of trading.

2.AvaTrade

AvaTrade was founded in 2006 in Dublin, Ireland. They are one of the largest and most famous Forex / CFD brokers in the world and became well-known for offering their clients a choice of fixed or floating spread cost of trading models. They enjoy an extremely high and strong level of regulation, making them a favorite for traders who are extremely nervous about the security of their deposit, which in Ireland can be protected by a strong investor deposit protection provision. AvaTrade is directly regulated in Ireland (and by extension, the European Union), Australia, Japan, South Africa, and the British Virgin Islands. Outside the European Union, Ava’s maximum leverage offered runs as high as 400 to 1. 


3.OctaFX


Founded in 2011, OctaFX is a “Straight Through Processing” (STP) broker, which means they do not have an internal dealing desk. They simply connect buyers and sellers directly. With this model, OctaFX aims to be more cost-effective than anyone else in the market. They offer low spreads and claim 97.5% of trades are executed without slippage. 
OctaFX offers their clients a choice of three Forex trading platforms: the world’s most popular MetaTrader 4 (MT4), MetaTrader 5 (MT5), and cTrader. All of these can be traded as a desktop application, and on Android and iOS devices. 

4.XM


Founded in 2009, XM has grown into a firm employing more than 450 professionals to service the financial trading community. It is a well-regulated firm with licenses from the Cyprus Securities and Exchange Commission (CySec) and the Australian Securities and Investments Commission (ASIC).

5.Moneta Markets

Moneta Markets is a subsidiary of Vantage International Group Limited (VIG), established in 2009. VIG is licensed in 3 jurisdictions and handles an average monthly trading volume exceeding $100 billion. 

2- Understanding Forex trade

We will first dive into some important terms that you would need to know while placing your trade.

1. Lot Sizes
2. Leverage
3. Margin

4. Stop Loss

3- How to place a trade in forex market?

1. Buy Order in Forex

2. Sell Order in Forex 

 

India Forex Trading Strategies

1.Scalping

Scalping is a forex trading strategy that involves making small profits with multiple trades. You can set the entry and exit positions with minor changes in the currencies to achieve low margins. Scalping needs precise execution to make the most of your trades. 

These are short-term trades that can last anywhere between 1 to 60 minutes. Being well-informed about currency trends is crucial to successful scalping. 

2.Swing trading

Swing trading is a strategy that involves trading forex currencies over a day or a week. This method gives you plenty of time to deflect daily ups and downs in the value of currency pairs. You can skip through needless stop losses along the way with this medium-term forex trading strategy. 

3.Day trading

As the name suggests, day trading involves opening and closing a trade on the same day. These trades can take place anywhere between a few minutes to a couple of hours. This way you can avoid running through unprecedented losses due to overnight price volatility. 

If you’re new to forex trading, day trading is a simple and straightforward method to start earning. It can limit your risk while improving your chances of profitability.  

4.Position trading

Position trading is a strategy that involves holding your trade positions open for the long term. These trades can take place anywhere between a week to several months or even years. This method lets you take advantage of major shifts in the value of currency pairs without stressing over micro changes in the market. 

You can set the entry and exit positions for lengthier durations with position trading. Keeping a watchful eye over current events and socio-economic policies that affect the world at large is key to making this type of trading work. You can casually sign-in to your account once or twice a week. 

5.Range trading

Range trading is a strategy that involves predictable price movements of currency pairs. This method relies on historical performance data of currency pairs to identify repeating patterns of lows and highs. 

Based on the financial data, you can set a wider entry and exit position to capitalize on previous price trends. With the calculated risks involved, it is a safer alternative to day trading


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