The Forex Market is one of the world's largest financial markets, with an average global daily trading volume of $6.6 trillion. Even in India, its popularity has sky-rocketed in the years, with more Indians willing to dive into forex trading. However, not many know where or how to start.
If you, too, want to make the most of the opportunities the Forex market provides, this guide is just for you. Below we will discuss all you need to know about starting forex trading in India.
What is Forex Trading?- Forex Trading Meaning
'Forex' is short for foreign exchange. Hence, forex trading is the process of exchanging one currency for another. The exchange can be performed for various reasons, such as fostering international trade, tourism, or commercial purposes.
You may unknowingly have participated in the market by buying foreign products or exchanging money during foreign travel. The commercial trading of foreign currency is done mainly for profit. The trader tries to take advantage of the difference between buying and selling prices of various currencies to earn some hard bucks.
However, due to the large volume of exchange happening every day, the prices of the currencies are very volatile. So while there is a possibility of generating lucrative returns, there is also a risk factor attached to the forex market. It is what makes the market interesting.
Forex Trading For Beginners- How to Trade Forex in India?
The ease of online trading has made forex trading accessible to all laymen today. Still, the process can be tricky and intimidating, especially to those new to the game. Here's a step-by-step guide to help you get started:
Open Account with A Reputable Broker
To begin forex trading, you must first open an account with a regulated broker. Always choose a broker licensed by the Securities and Exchange Board of India (SEBI). SEBI regulations will protect you from unfair or dishonest practices by brokers, which is crucial in risky trading.
Beginners should start with a micro forex trading account with low capital requirements. This will allow you to understand the workings of the market before you take a giant leap.
Access a Trading Platform
Trading platforms connect traders to the forex market. Most brokers also offer their custom-built platform for trading forex. You can access them online or install them on your smartphone.
Upstox is one such platform that is easy to use and reliable. It allows you to choose various plans (basic, priority, or pre-paid plans) per your requirement. With minimal fees and no hidden charges, it is one of the best forex trading platforms in India.
Learn Basic Trading Strategies
Forex trading is mainly about forecasting how the exchange rate will move. For instance, if you see signs of the rupee strengthening vis a vis dollar, you would want to buy it. If your prediction goes right, you can sell it on price increment and earn a profit. But if you're prediction goes wrong, you may lose your money.
One must understand that forex trading is not a scheme to get rich quickly. Becoming a successful trader takes time, experience, and a solid understanding of the market. As a beginner, it's best to go for a low-risk strategy and trade with small sums of money first.
Start Trading!
So now you're all set to begin your forex trading journey. Sign in to your account and select a permissible trading par to start forex trading in India. Some currency pairings available for trading in India are:
- EUR/INR
- USD/INR
- GBP/INR
- JPY/INR
- EUR/USD
- USD/JPY
- GBP/USD
What is the Best Time to Trade Forex in India?
Though forex trading in India is available 24 hours from Monday to Friday, certain times are more favourable than others. Most traders agree that the best forex trading time in India is when the market is most active. Active markets provide you with tight spreads, high volume, and plenty of opportunities for making profits.
Generally, the forex market is most active during the overlap of the two trading sessions, especially the European and North American Sessions. This is because many buyers and sellers are trading currencies during this time.
Look at the global forex exchange timings in Indian Standard Time (IST) and the most traded currency pairs during the session as per the Traders Union Analysis.
| Trading Sessions | Trading Hours (IST) | Most Traded Currency Pairs |
| Tokyo (Asian Session) | 3:30 am to 12:30 pm | NZD/USD, AUD/USD, etc |
| Sydney (Pacific Session) | 4:30 am to 2:30 pm | USD/JPY, GBP/JPY, EUR/JPY, etc |
| London (Europe Session) | 1:30 pm to 10:30 pm | EUR/USD, EUR/GBP, USD/CHF, GBP/USD etc |
| New York (North American Session) | 6:30 pm to 3:30 am | EUR/USD, USD/JPY, GBP/USD, etc |
| Overlapping Trading Sessions | Trading Hours (IST) | Most Traded Currency Pairs |
| New York and London | 6:30 pm to 10:30 pm | AUD/USD, AUD/NZD, AUD/JPY, USD/JPY, NZD/JPY, NZD/USD etc |
| London and Tokyo | 1:30 pm to 2:30 pm | EUR/JPY, GBP/JPY, etc |
| Tokyo and Sydney | 4:30 am to 12:30 pm | EUR/USD, GBP/USD |
Wrapping Up
Forex trading in India has garnered much attention in recent years because of the exciting opportunities it provides. However, forex trading for beginners is also fraught with market risks. Hence, it's crucial to have a viable trading strategy and take risks only to the extent one can tolerate them.
FAQ's
Is forex trading legal in India?
An Indian citizen can trade in foreign currencies only through recognized Indian brokers. Some popular currency pairs traded in India include EUR/INR, USD/INR, GBP/INR, JPY/INR, EUR/USD, USD/JPY and GBP/USD.
Where can I trade forex in India?
You can trade forex in India with exchanges such as NSE, BSE and MCX-SX. You will have to open an account with a regulated broker and gain access to a trading platform such as the one provided by Upstox.
What is the exchange rate in forex trading?
The exchange rate is the rate at which you can trade one country's currency with that of another. Most exchange rates are volatile and can rise or fall with the change in the demand and supply forces of the market.
For instance, if the current exchange rate between the US dollar and the Indian currency is INR 79, 1 US dollar can be exchanged for INR 79 in the foreign exchange market.
What does 'spread' mean in forex trading?
Spread is the marginal difference between a currency's buying (bid) price and the selling (ask) price. Usually, the buying price of a currency is kept slightly higher than its selling price. You can consider this as the cost of trading.
Let's say you're trading in GBP/USD at a buy and sell (bid and ask price) of 1.3088 and 1.3090, respectively. Then the spread would be (1.3090-1.3088) = 0.0002 or 2 pips.
What is a currency future?
A currency future is a contract to exchange one currency for another in future at a pre-determined date and price. They are also known as foreign exchange futures or FX futures. It is a currency derivative popular among speculators in the forex trading market.
Currency future in India was first introduced in 2008 on the National Stock Exchange. It is now available on the Bombay Stock Exchange (BSE) and MCX-SX.