Are Forex Trading Platforms Illegal in India?

Trading is often encouraged as an investment mode since it allows the trader to gain returns in a systematic manner. Trading can occur on a range of commodities and even instruments such as equity or stock.

Currency is another commodity that is commonly traded across the world. Called as foreign exchange (forex) trading, currency trading occurs on foreign exchange markets. Forex trading is most often conducted over a foreign exchange trading platform, wherein an individual trader bets on whether a certain currency will rise or fall against the domestic currency.

Since there is no middle party involved in this transaction, and it occurs solely between the trader and the platform, such trades are referred to as binary transactions. If the trader bets that a certain currency will rise against the domestic currency, and it does, they earn an amount that was previously decided upon. If the currency actually drops, the trader loses the sum they had bet.

The trades are settled by cash, since it involves simultaneous buying and selling of currencies. While this is a feature wherein currency trading differs from trading in stocks or other instruments, another major difference is that you don’t require opening a DEMAT account to trade in currencies.

Forex Trading Illegal In India

In India, however, forex trading platforms are banned. While you cannot directly trade in the foreign exchange market, you can still trade in currencies through the stock exchange. Under the Foreign Exchange Management Act (FEMA), binary trading is not allowed. While trading in foreign currencies is allowed, it does come with certain restrictions.

For instance, the base currency being traded upon has to be the Indian Rupee (INR). There are only 4 currencies that can be paired with the INR and these include the US Dollar (USD), Euro (EUR), Great Britain Pound (GBP), and Japanese Yen (JPY).

Read on to learn about how Indian traders can easily trade in currencies.

Forex Trading in India

The first thing you need to do in order to start trading in the forex market is to get in touch with a broker with an international reach, since the market operates across locations like New York, London, Tokyo, and Singapore.

Another of the first things you need to do is open a currency trading account. Read on to learn how to proceed with that.

Start a Trading Account:

Start a trading account with a broker that is reputed and has a proven record of excellence in trading

Complete the KYC:

For the account to become functional, you need to complete the KYC process. This might require to submit certain documents and information about yourself

Margin Requirement to Trade:

A certain margin will be required of you before you can start trading. The broker will intimate you regarding the margin amount required and you can deposit it to start trading at the earliest.

Access to Credentials:

Finally, you will need to request the necessary access credentials that your broker will be able to provide you with.

Once you begin trading, like every other investment, it is necessary to take informed decisions and wise choices.

Tips for Forex Trading

There are some tips listed below that could help you if you have just begun investing with foreign exchange trading platforms.

Research the market:

Any market that you begin trading in is likely to be affected by a range of factors and happenings, both local and global. It is essential to have a multitude of data regarding the market, including historical trends of how the currencies have fared against each other, and the events that influenced any discrepancies or sudden jumps and drops. Researching all this prior to investing in the foreign exchange market will allow you to keep a keen eye on the market and understand its movements and direction.

Assess research strategies:

Conduct thorough research and analysis to assess the different investment strategies that traders have successfully employed to gain high returns in currency trading. It also helps to compare the different strategies and construct your own personalised strategy that is able to align with your own goals and requirements.

Keep your trading currencies constant:

It is always best to trade with one currency pair, or a maximum 2, to ensure you are not spreading your interests too wide. Maintaining focus on your assets is one of the first lessons to be learned during trading, regardless of which instrument it is. For instance, if you are trading with the USD and the GBP or even just one of them, stick to these for a longer period of time rather than also trading with JPY and EUR. This will enable you to learn about the market conditions with these currencies more thoroughly and develop a  more structured strategy for reaping returns.

Keep your goals in sight:

Before you begin investing, it is always necessary to identify what your investment goals are. This could be anything, from short-term goals that involve a family vacation or long-term goals such as a child’s education or marriage, or even your own retirement. Based on the timeline you have given yourself for meeting these goals, you will be able to zero in on the best strategy to adopt to ensure that your investment goals are met. For instance, while trying to meet long-term goals, you can adopt a more conservative approach than if you are trying to meet short-term goals, for which you need to be able to generate returns quickly.

Identify your limits:

While you are putting a strategy in place, it is also important to mark out your own limits. Identify well in advance the point at which you will withdraw from a trade or the point at which it will no longer be sustainable for you to trade. Once you have identified that, it will be much easier to take decisions in a dynamic manner in line with market movements.

While participating in forex trading in India, knowing these tips may help you reap successful returns that help you meet your investment goals comfortably. Knowing your market and instrument is important to be able to successfully navigate the trading landscape, which is why it is important to remain updated on happenings in the world that might affect currency movements.