Forex trading in India is a comparatively new market growing at a slow pace. Lack of knowledge among the general public about this trading business is one of the reasons behind its moderate growth.
What is Forex trading?
Forex or foreign exchange or FX is the buying and selling of foreign currencies. Trading occurs between two currency pairs – for example, EUR (euro) and USD (US dollar). You buy one currency and sell it at a higher price depending on the exchange rate – for example, 1.1200. Here, 1.1200 EUR is worth 1 USD.
Forex trading in India
Financial malpractices have led to the Indian Government’s intervention in this trading. Now, the SEBI regulates the entire Forex market with the Foreign Exchange Management Act, 1999 (FEMA) stating the rules and regulations. The FEMA makes several Forex trading activities illegal and punishable by law.
You have to keep the following points in mind before starting a Forex trading business:
- Trading is only permitted on currency pairs with INR as the base currency.
- Currently, you can trade in only 5 currency pairs – USD/INR, EUR/ISD, JPY/INR, and GBP/INR.
- You can only take part in trading with a SEBI-registered domestic Forex broker.
- NRIs cannot take part in Forex trading.
- Trading time is 9 AM to 5 AM.
How to start Forex trading?
Some of the expert tips you can follow to start your own Forex trading:
-
Learn about the Forex trading market
Having adequate knowledge of the Forex trading business is essential although it may not be directly related to starting your own business. There are various websites offering training courses with tutorials and eBooks that can help you out with understanding its intricacies.
-
Decide the type of trading you want to do
Forex trading is usually of four types:
- Scalping – Scalping involves conducting a trade or holding a position for a short span of time, a few minutes to a few hours. The risk is minimal, and the revenue you earn is also small.
- Swing trading – Swing trading involves holding a position for several days. The risk to reward ratio is high in this case.
- Day trading – Day trading, as the name suggests, lasts for a day. It is when the market opens and ends when it closes. The risk is also high in this case along with the return.
- Position trading – Position trading can last for weeks, months, or even years. Traders taking part in this trade are usually professional and experts.
Choosing the right type is essential to manage your working capital for your trading business.
- Open a demo account
A demo account helps you to practice trading with virtual currency. Forex trading websites offer these accounts with a limited amount. You trade in the live market with a real platform.
-
Select the right broker
Choosing the right broker is essential before you start trading. As mentioned above, you must opt for a broker that is registered with SEBI.
You have to consider the following points before doing so:
- Transaction costs
- Security
- Trading platform
- Deposit and withdrawal
- Customer service
Open a demat account with the broker of your choice. A demat account is necessary to conduct Forex trading.
Forex trading is an ideal way to bring your manufacturing business ideas in India to reality. You can earn the seed capital necessary to start your company.
Opting for a business loan can provide the funds needed when you look to expand. Companies like Bajaj Finserv provide Business Loans of up to Rs. 30 Lakh across tenors up to 60 months.
Keep these tips mentioned above in mind to start Forex trading. Make sure to start investing a smaller amount when you begin.