Forex Trading In India

Forex trading in India offers a potentially lucrative opportunity to speculate on the foreign exchange markets. But whilst it is legal, forex trading in India is tightly regulated. This guide will cover everything Indian investors need to start forex trading in 2024, including popular pairs, trading hours, how to find a regulated provider and more.

Forex Brokers In India

We have reviewed over 490 brokers as of February 2024 and found these to be the top 3 forex brokers for Indian traders:

#1
AvaTrade
Bonus
20% Welcome Bonus up to $10,000
#2
XM
Bonus
$30 No Deposit Bonus When You Register A Real Account
#3
Expert Option
Bonus
100% deposit bonus

The Best Forex Brokers in India

How Forex Trading Works In India

Forex trading is only legal in India when done through a provider regulated by the Securities Exchange Board of India (SEBI). These platforms only allow trading with the Indian Rupee as the base or quote currency and three other cross currency pairs. You can also carry out forex trading through some Indian banks, like HDFC bank, if they are registered with SEBI. You might need to be a client or follow other requirements to be able to exchange currencies through Indian banks.

The minimum investment for forex trading in India will depend on the account, but you can start exchanging currencies with a budget as small as ₹40,000. This is ideal for beginners to forex trading in India. Keep in mind that every platform will have a minimum deposit and minimum trade sizes.How To Do Forex Trading In India Legally

Forex trading in India is available on the spot and futures markets only. The spot market is also known as the cash market and deals with instant transactions. In the futures market, traders buy and sell futures contracts for delivery on a specified date in the future. This market is the more popular for forex trading in India and has a rising daily trading volume.

Spot Market

Suppose that you are looking to buy USD on the spot market, you will need to find a forex platform in India that offers the INR/USD pair at a competitive price. For example, your platform’s price for 1 USD is 74.500 INR. Currency is often bought in lots, where a lot is 100,000 units – in this case, $100,000. You are looking to buy $200,000, or two lots.

To calculate the cost in Rupees, you will need to multiply 100,000 units by the number of lots and then the cost of one USD: 100,000 x 2 x 74.500 = ₹14,900,000. Keep in mind that your provider might charge a commission on top of this.

Because you have bought your USD on the spot market, the currency will be available to you immediately. You could use some of that USD to buy something online and avoid the bank’s exchange costs, or you can use that USD to buy a different currency, like USD/EUR. However, many traders will wait until the exchange rate has increased to sell them again for profit.

Imagine that a few weeks later, the price for INR/USD is 75.500 INR, meaning that every dollar is now worth 1 INR more than when you bought them. You can sell them back for ₹15,100,000 (200,000 x 75.500), and you will have made a profit of ₹200,000.

Futures Market

In the futures market, you agree on a price and a date when you will receive the currency. Let’s suppose that the spot price for USD is 74.500 INR, and the futures price for next month is 75.500 INR. You believe that the price next month will be higher than this, so you buy a one-month futures contract for $200,000. You are therefore promising to buy $200,000 for ₹15,100,000 in a month from now.

After a month passes, the price of USD is 76.200 INR. You pay the promised ₹15,100,000 for your dollars, and you sell them for the spot price, receiving ₹15,240,000. Therefore, you have made a profit of ₹140,000. Forex options trading is similar to the futures market, except that you are not obligated to buy the currency after the agreed price and date.

Forex trading in India is strictly regulated and limited to pairs determined by the Securities Exchange Board of India (SEBI). These pairs include any currency paired with the Indian Rupee (e.g. INR/USD, INR/GBP, INR/EUR and INR/JPY) plus three cross currency pairs: USD/JPY, GBP/USD and EUR/USD. The most traded pairs in the forex futures market in India are INR/USD, INR/EUR and USD/JPY.

Forex Trading Vs Stock Trading In India

Where forex trading involves the buying and selling of the currency pairs mentioned above, stock trading involves the buying and selling of company shares. It is legal to open both long and short positions when stock trading in India, although short-selling was restricted between 2001 and 2008 and again more recently during the COVID-19 pandemic.

Names Of Forex Trading Companies In India List

The National Stock Exchange of India (NSE) is open Monday to Friday from 09:00 IST to 17:00 IST. If you are interested in trading international stocks in India, such as GameStop or Tesla, you will need to convert the market opening hours to Indian Standard Time.

Forex Trading Hours In India

Forex markets are open 24-hours a day, Monday through Friday. Trading in Indian pairs is typically best done from 09:00 IST, the local stock market start time, to 17:00 IST, when they close. Many providers will offer clocks and calendars that will automatically convert opening hours to your local timezone.

When forex trading in India, it is important to keep in mind the volatility and liquidity periods of different markets. The first trading hour of each week trends to offer the highest volatility and lowest liquidity as traders react to the news events of the weekend. This period may be most beneficial for forex traders in India interested in a scalping strategy. High volatility will allow for multiple quick, low-profit trades over a short period of time.

Volatility will likely increase again when the London market opens at 13:30 IST and reaches its peak when the US market opens at 19:00 IST.

Pros Of Forex Trading In India

Risks Of Forex Trading In India

How To Start Forex Trading In India

The first step when getting started is finding a suitable brokerage that meets your requirements. The SEBI has an online register of platforms with a license for forex trading in India; you should check your provider is on this list to avoid any legal complications. Companies will offer forex accounts in India in a variety of languages, including Hindi, Malayalam or Tamil, and you will want to find a firm that supports your native or preferred tongue.

Check out our complete guide to finding a forex brokerage in India here. We cover everything you need to know, including demo accounts, fees, platforms and software, mobile apps and customer support.

Once you have chosen a provider, follow this step-by-step guide to start forex trading in India:

  1. Open an account – Choose your account type, fill in the necessary verification information and wait for your account to go live.
  2. Choose a market – You might want to trade forex in India with INR-based pairs or international cross-pairs.
  3. Open a position – Once you have carried out market analysis and identified a trend you wish to take advantage of, you can buy the currency (go long) or sell it (go short).
  4. Implement risk management – Many companies offer risk mitigation order types like stop losses and take profits. These will automatically close your position if it reaches a predetermined profit or loss limit.
  5. Monitor your position – Forex trading can be extremely volatile and some trades only last a few minutes. Make sure to monitor your position closely and keep an eye out for any unexpected swings.
  6. Close the position – Opening and closing a position at the right time is key to successful forex trading in India. Once you have determined a trade has been profitable, or not, enough, close the position.

Regulation

The Reserve Bank of India (RBI) regulates all financial services in India. The Securities Exchange Board of India (SEBI) follows RBI guidelines and regulates forex companies and traders. SEBI imposes strict restrictions on forex markets, including limiting leverage and restricting trading to currencies paired with the Indian Rupee (INR).

Many international forex brokerages target Indian residents for trading abroad but using a provider that is not authorised by the SEBI or exchanging non-regulated currencies is punishable by law. SEBI has a full list of licensed forex trading companies on their website and using a platform on this register will help protect Indian residents from scams, fraud or illegal trading.

Is Forex Trading Taxed In India?

Unless your profit from forex trading in India falls under the basic exemption limit, you will need to report it as capital gains. If you are forex trading as a business entity, you will have to pay business income tax. It is advisable to speak to a local tax consultant before beginning forex trading in India.

Forex Trading Education In India

Many forex companies in India offer comprehensive training programmes and courses. These cover the basics of forex trading in India and aim to improve your trading skills and overall knowledge of the markets.

You can find resources for traders of all levels, from beginner to expert tutorials. Here you can learn more about strategies and approaches like copy trading, which is a form of automated trading that allows users to copy positions opened and managed by selected individuals. Other forms of automated trading, like the use of forex robots, are explained in tutorials online.

Most platforms that support forex trading in India host blogs, forums or tutorials on their websites as PDFs, articles or videos. Many will also have a YouTube account to which they upload their videos.

There are also extensive market research materials available on forex trading in India, especially with the international pairs. Keeping up with the latest news is key to successful trading. Books and websites like Business Insider and TradingView are great places to start. Blogs, such as Reddit and Quora, and WhatsApp groups will offer tricks and tips from others more experienced in forex trading in India.

Final Word On Forex Trading In India

Forex trading in India is becoming increasingly popular and there is a growing number of licensed firms that operate legally in India. Despite restrictions, there are still several opportunities and markets available to Indian traders. Before deciding where to trade on the Indian spot and futures forex markets, read our full guide to choosing the right account here.

FAQs

Forex trading in India is legal but rules state that you must use a locally regulated platform and pay capital gains tax on any significant profits. Broker certification can be checked on the list of registered firms on the SEBI website. Trading is also only allowed for pairs involving the INR and the USD/JPY, GBP/USD and EUR/USD.

What Are Forex Trading Hours In India?

Forex trading sessions in India are open 24-hours a day. However, the times for the best liquidity and volatility will be found when other major trading sessions are open, like the LSE and NYSE market hours.

Is Forex Trading Profitable In India?

Forex trading in India is not guaranteed, as with all forms of investing. However, the periods of high liquidity and volatility that currency pairs exhibit can help improve your chances of success. Whether you are trading casually or as a job, finding a trustworthy provider and implementing robust risk management steps are key to success.

What Is The Best Forex Trading Platform In India?

The most common forex trading platforms in India are MetaTrader 4 and MetaTrader 5. These can be downloaded for free for a PC, Mac or mobile device. Many firms will also offer their own proprietary software that will likely be available online or as a mobile app. The best platform for you will depend on the style and frequency of your trading.

How Do I Start Forex Trading In India?

There are many firms out there, such as Zerodha, Sharekhan and Upstox, with which you can start forex trading in India. Zerodha, Sharekhan and Upstox are among the biggest online forex companies in India, but there is a lot of competition. Check out our list of the top 10 forex trading brokers in India and compare fees, platforms, regulation status and customer support before opening an account.

What Is The Best Forex Trading Company In India?

There is a lot of competition, so be sure to compare fees, market access, additional features and customer service before choosing a firm.

How Do I Earn Money From Forex Trading In India?

Forex trading is not a guaranteed money-maker, like most other jobs, as traders take chances with every position they open. Taking relevant classes or joining a forex trading community in India are good ideas to help you learn to constantly improve your chances of success.