Forex Trading in India: A Detailed Insight

When we speak of Forex Trading in India, the RBI regulations limit the trader’s options. Currently, the currency pairs available for Forex trading across the world, are marked against the INR in India. Hence, for a majority of traders, who deal in international transactions, it is a major disadvantage. When the global Forex trading is dominated by the USD, occupying more than 87% of the net trade practices, Forex trading is not much profitable for Indian investors.

RBI, the body which regulates the financial implications and proceeds of the nation, has a different definition where Forex Trading in India is done primarily in the form of trading in currency derivatives convertible into INR. According to RBI, “a person resident in India may enter into currency futures or currency options on a stock exchange recognized under section 4 of the Securities Contract (Regulation) Act, 1956, to hedge an exposure to risk or otherwise, subject to such terms and conditions as may be set forth in the directions issued by the RBI from time to time”.

Forex Trading

Rules applicable to Forex trading in India

  1. Since 2008, RBI and SEBI have permitted trading in currency derivatives. The currency pairs available for trading are USD-INR, EUR-INR, JPY-INR and GBP-INR.
  2. Currency options can be availed by investors only for USD-INR pair.
  3. As of now, trading is permitted in BSE as well as NSE.
  4. Contracts will be cleared only in cash where the currency would be INR.
  5. The lot size is fixed for futures where it is 1000 units, apart from the JPY/INR pair which has an extended lot size of 100000 units.

Steps to start Forex Trading in Currency Futures

Forex Trading in India

Forex trading can be quite profitable if you possess the right attributes. Here is a list of steps which can be followed prior to the trading.

  1. Open a trading account with a broker which offers trading in Currency Derivatives. How to select your Stock Broker?
  2. As the accounts are essentially online, and Forex trading is an online service, you can access your account through login id and a password. This is similar like trading in equity and futures.
  3. Research the operational guidelines of the platform you are using.
  4. Keep a check on the brokerage rates, the exchanges the bank holds the tie-ups with, and the products offered.
  5. Below is an excellent trading system for USD-INR pair:

USD-INR Currency Trading Strategy

The most important advantage behind Forex Trading in India is the margin trading principles. Hence, one can easily trade for a bigger profit at a smaller deposit. The margin required to trade 1 lot (1000 Quantities) of USD-INR pair in NSE is around 1500~ INR which accounts to only 2.5% of the actual investment.

usd-inr-margin

The currency market is quite volatile and hence effective analysis needs to be done prior to making an investment decision. Several reputable firms and institutions offer great insights to their users through various channels. Hence, one can observe them while making fruitful investments and earn greater returns on the investment made.

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