Forex Trading in India: How to Start and Key Terms to Know

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The practise of selling one currency and buying another is known as forex trading. As a result, while discussing forex trading, we always refer to trading a currency pair. If you trade EUR/USD, for example, you are exchanging euros for US dollars.

Forex trading is popular among investors who wish to profit from currency swings. However, forex trading is subject to certain restrictions and regulations in India.

The Legality of Foreign Exchange Trading in India:

Forex trading is legal in India, although there are some restrictions. Only four currency pairs are permitted for trading by the Reserve Bank of India (RBI): USD/INR, EUR/INR, GBP/INR, and JPY/INR.

Also Read: 8 high-potential cryptocurrencies to invest in 2023

These currency pairs can be traded on Indian exchanges such as the NSE, BSE, and MSEI. The Securities and Exchange Board of India (SEBI) regulates and standardises the trading of currency futures and options contracts on these exchanges. These currency futures are traded Monday through Friday from 9:00 a.m. to 5:00 p.m. IST. The trades are cash-settled and do not entail any physical delivery.

Indian residents are not allowed to trade any other currency pairs, especially those involving the Indian rupee, on foreign or offshore platforms. This is considered illegal and punishable by law.

How Do I Begin Forex Trading in India?

If you wish to start forex trading in India, you must first complete the following two simple steps:

Establish an account with a SEBI-regulated broker or a foreign broker who accepts Indian clients.
Start by funding your account and trading the currency pairings that are accessible to you.
You may have different choices for depositing and withdrawing money from your account depending on the broker you use. Bank transfers, credit or debit cards, e-wallets such as Skrill, Neteller, or PayPal, and cryptocurrencies such as Bitcoin or Ethereum are all frequent methods.
Before you begin trading, you should also become acquainted with the fundamentals of forex trading, such as how to read a quote, place an order, use leverage and margin, manage risk and emotions, and develop a trading strategy and plan.
Online courses, books, podcasts, webinars, blogs, forums, and social media can all help you learn more about forex trading. You can also practise your abilities and learn from other traders by using demo accounts or duplicate trading platforms.

Important Forex Trading Terms and Strategies in India:

To be successful in forex trading in India, you must first learn some of the major phrases and tactics employed by traders. Here are a few examples:

Spread is difference between a currency pair’s bid and ask prices. The bid price is the price at which a currency can be sold, whereas the ask price is the price at which a currency can be purchased. The spread is typically stated in pips, which are the smallest price movement units. If the EUR/USD pair is quoted at 1.1850/1.1852, the spread is 2 pips.
Leverage is defined as the ratio of the amount of money you can trade with to the quantity of money in your account. Leverage allows you to trade with more money than you have, which increases your earnings or decreases your losses. For example, if you deposit $1,000 and utilise a leverage of 100:1, you can trade with $100,000. Leverage, on the other hand, increases your risk exposure and may result in margin calls or liquidation if the market goes against you.
Margin is the amount of money required to open and maintain a leveraged position in your account. Margin is typically expressed as a percentage of your position’s overall value. To start a $100,000 position with a leverage of 100:1, for example, you must have at least $1,000 in your account as margin (1% of $100,000). If your margin falls below a certain threshold (usually 50% or less), your broker will send you a margin call, asking you to deposit more funds or close some positions to avoid liquidation.
In forex, a Lot is the usual unit of trading size. A lot consists of 100,000 units of the base currency (the first currency in a pair). One lot of EUR/USD, for example, is equal to 100,000 euros. Mini lots (10,000 units), micro lots (1,000 units), and nano lots (100 units) are also available.
In forex, a Pip is the smallest unit of price fluctuation. For most currency pairs (excluding those involving the Japanese yen, where one pip equals 0.01), one pip is usually equivalent to 0.0001. For example, the EUR/USD pair has changed 5 pips from 1.1850 to 1.1855.

Technical analysis is the use of charts and indicators to study price patterns and trends. The concept behind technical analysis is that history tends to repeat itself and that price fluctuations are affected by supply and demand forces. To discover trading opportunities and signals, technical analysts employ a variety of techniques such as trend lines, support and resistance levels, moving averages, Fibonacci retracements and extensions, oscillators, candlestick patterns, chart patterns, and others.
Fundamental analysis is the study of economic and political factors that influence currency value. Fundamental analysis presumes that currencies reflect the strength or weakness of their respective economies, and that price fluctuations are driven by macroeconomic events and news. Fundamental analysts rely on a variety of data, including economic calendars and central bank releases.
Sentiment analysis is the study of psychological and emotional elements that influence traders’ and investors’ behaviour. Sentiment research is based on the notion that market participants’ collective mood and attitude influence price fluctuations. Sentiment analysts use a variety of tools, including surveys, polls, social media, news headlines, market indicators, and more, to assess market optimism or pessimism, fear or greed, confidence or uncertainty, and risk appetite or aversion, and to identify potential trend reversals or continuations.
Scalping is a short-term trading method that entails creating and closing positions within minutes or even seconds in order to capitalise on small price fluctuations. Scalpers typically trade with high leverage and frequency, with the goal of making numerous tiny profits while limiting their risk exposure. Scalping necessitates a high level of discipline, concentration, and patience, as well as a quick and dependable trading platform and execution.
Swing trading is a medium-term trading technique that entails maintaining positions for several days or weeks in order to capitalise on significant market fluctuations. Swing traders often trade with modest leverage and frequency, with the goal of making fewer but larger profits while capitalising on market patterns and cycles. Swing trading necessitates a firm grasp of technical and fundamental analysis, as well as a flexible and adaptive trading strategy.
Position trading is a long-term trading technique that entails maintaining positions for months or years in order to capitalise on large market moves. Position traders often trade with low leverage and frequency, with the goal of making large returns while disregarding minor market changes and noise. Position trading necessitates a strong conviction, a long-term perspective, and a high risk and volatility tolerance.

Here are the 5 best forex trading apps in India with some advantages:

Zerodha Kite:

* Zerodha Kite is one of the most popular forex trading apps in India. It offers a wide range of features and tools, including real-time market data, technical analysis tools, and a variety of order types.