Forex Trading in Nepal

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Written By
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Written By
Tony Kent
Tony is an active trader and property investor with 20 years experience working with some of the largest companies in financial services worldwide. Skilled at technical and fundamental analysis, alongside risk management, he has seen success dealing an array of tradable instruments, from currencies, equities and commodities to higher-risk vehicles like cryptocurrencies and CFDs.
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Edited By
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Edited By
James Barra
James is an investment writer with a background in financial services. As a former management consultant, he has worked on major operational transformation programmes at prominent European banks. James authors, edits and fact-checks content for a series of investing websites.
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Fact Checked By
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Fact Checked By
Michael MacKenzie
Michael is a writer and editor with over a decade in journalism and publishing. His niche lies in editing and fact-checking content in the financial services sector, with a focus on online brokers and trading platforms. Michael previously reported on politics and economics in the Middle East and edits books for established publishers.
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With disposable incomes rising in Nepal, driven largely by remittance payments, alongside financial literacy, more Nepalese residents are interested in forex trading.

However, strict regulations from the Securities Board of Nepal (SEBON) and Nepal Rastra Bank (NRB), alongside an illiquid Nepalese Rupee (NPR) present major challenges for traders.

This beginner’s guide to forex trading in Nepal unpacks the regulatory and tax landscape and walks through an example trade on the GBP/NPR currency pair.

Quick Introduction

  • Nepal’s SEBON and NRB tightly control FX trading, with speculative activities typically forbidden – only transactions covering expenses for education, health, or tourism are allowed.
  • The Nepalese Rupee is pegged to the Indian Rupee at around 1 INR to 1.60 NPR. But low trading volumes and volatility, plus the limited availability of NPR currency pairs are hurdles.
  • The best time to trade FX is generally during the London Session (12:45 PM to 9:45 PM NPT) and New York Session (6:45 PM to 1:30 AM NPT), offering the greatest liquidity and volatility.

Top 4 Forex Brokers in Nepal

After extensive testing, these 4 platforms came out on top for active forex traders:

Click a broker for details
  1. 1
    Vantage
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    4.6 / 5
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    4.3 / 5
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    4 / 5
    4 / 5
    3.6 / 5
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    $50
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    USD, EUR, GBP, CAD, AUD, NZD, JPY, HKD, SGD, PLN
  2. 2
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    Wire Transfer, Credit Card, Debit Card, Visa, Mastercard, Skrill, Neteller, ACH Transfer
    USD, EUR, GBP, CAD, AUD, JPY, CHF, PLN

How Does Forex Trading Work?

Forex trading involves the conversion of one currency into another to make a profit. Traders try to profit from currency fluctuations by simultaneously buying and selling currencies in pairs.

Since the Nepalese Rupee (NPR) is pegged to the Indian Rupee (INR), traders often engage with more liquid currency pairs, like USD/INR, instead of directly trading NPR.

For example, you might buy the USD/INR pair if you believe the US dollar will strengthen against the Indian Rupee, aiming to sell it later at a higher price and profit from the difference.

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Due to capital controls in Nepal, direct access to forex markets is limited, and traders typically rely on global brokers for access to popular FX pairs.

Forex trading in Nepal is strictly regulated, and understanding the rules is critical. Two organizations regulate the Nepalese market:

Speculative forex trading is not generally permitted for Nepali citizens. You are only allowed to conduct FX transactions for specific purposes outlined by the NRB, such as covering expenses connected to education, health, or tourism.

Choosing a regulated firm should be high on your list of priorities to ensure your transactions are legal and protected.

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Tony Kent
Author

Is Forex Trading Taxed In Nepal?

Forex trading profits are taxable in Nepal, and you may need to pay income tax on your net profits minus your trading expenses and losses. Capital gains on forex transactions may also apply.

Residents are taxed on their global income earned in any given tax year, whereas non-residents are taxed only on any income earned in Nepal.

You should register for a Permanent Account Number (PAN) with the Inland Revenue Department (IDR) and submit tax returns annually.

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With the evolving regulatory and tax framework, consult an accountant familiar with FX trading and the latest rules in Nepal to ensure compliance.

When Is The Best Time To Trade Forex?

The best time to trade currencies in Nepal is generally in the global forex market sessions where you’ll find the most liquidity and volatility, which is key for short-term trading.

Nepal operates on Nepal Time (NPT), which is UTC +5:45. Unlike many countries, Nepal’s time zone includes a 45-minute offset, making it unique.

A GBP/NPR Trade

To show you how forex trading in Nepal really works, let’s run through a trade I executed on the GBP/NPR (Great British Pound/Nepalese Rupee).

Background

I’ve chosen this pair because it may be of interest to aspiring Nepalese traders. However, NPR currency pairs aren’t usually available on international trading platforms due to restrictions, and because of low liquidity, they can have wider spreads and slippage issues that can affect short-term trading strategies.

Analysis

In this trade, I employed a momentum bounce strategy using technical analysis to identify potential entry points on the GBP/NPR currency pair. Starting with the 30-minute chart, I looked for signs of overselling, which can indicate that the price may be due for a rebound.

To pinpoint my entry, I focused on the 20-day moving average as a key support level. When I observed that the price action was bouncing off this moving average, it signaled a potential upward momentum.

I waited for confirmation in the form of a bullish candle to close above the moving average, indicating buyer strength and suggesting that the price was likely to rise. I decided to enter the trade at 177.50.

Price chart of NPR/GBP currency pair for a forex trade
Source: TradingView

Risk Management

Effective risk management is crucial in forex trading, especially for aspiring traders looking to preserve capital.

In this trade, I adhered to my principle of never risking more than 1% of my total trading balance on any single trade. This approach helps to minimize the impact of potential losses on my overall account.

To manage risk, I set a stop-loss order just below the 20-day moving average at approximately 177.00. This stop-loss placement is strategic; it allows some room for price fluctuations while protecting me if the market moves against my position. If the price hits this level, my position would close automatically, preventing further losses.

In addition to the stop-loss, I utilized a take-profit order to secure my gains once the price reached 178.50. This way, I have a clear exit strategy that ensures I can capture profits without needing to monitor the trade constantly.

💡
Demo trading accounts are great for testing FX strategies and practising risk management before risking hard-earned Rupees.

Bottom Line

As Nepal, like much of South Asia, benefits from rising disposable incomes, financial literacy, and greater access to online trading platforms, interest in trading currencies is growing.

However, navigating the legal and fiscal landscapes carefully and ensuring compliance with Nepalese regulations is critical. And given the tight restrictions on forex trading, consulting a local professional is sensible.

To get started, see DayTrading.com’s selection of the top forex day trading platforms.

Article Sources

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