Is There any Legal Way to Trade in Forex for Indians?
Yes, you can trade with Indian currency and overseas currency pair.
Currency and Forex Trading
The global increase in trade and foreign investments has led to inter-connection of many national economies. This and the resulting fluctuations in exchange rates, has created a huge international market for Forex, opening up another exciting avenue for trading. The Forex market offers an unmatched potential for profitable trading in any market condition or any stage of the business cycle. Angel Broking provides a gateway to an exciting and rewarding world of currency trading.
FOREX is one of the largest and most liquid markets in the world and is the backbone of international trade and global investing. It is a $5.1 trillion market per day as per April 2016 estimates (BIS Triennial Central Bank Survey) and is open 24 hours a day. The most globally traded currencies are the US Dollar (DXY), Euro (EUR), Yen (JPY), Sterling Pound (GBP), Swiss Franc (CHF), Canadian Dollar (CAD), and Australian Dollar (AUD). The foreign exchange market is not only restricted to importers/exporters to make international payments but also for investors, speculators, hedgers, corporations, governments, and banks.
Traditional investors in India have always preferred stock markets over other major markets like forex and commodities particularly due to lack of knowledge which obstructs their investment decisions.The currency market is one such market which has a lot of potentials to provide investors with substantial returns but has somehow been the less preferred one.
In India, the foreign exchange market is a developing market and is traded on two platforms i.e exchange platform (NSE, BSE, MSEI/MCX) and over-the-counter platform. The four currencies used for the trading purpose are USDINR, GBPINR, EURINR, and JPYINR.
Trading on exchanges has increased over the years with an average volume of around Rs.25,000-30,000 crores per day.Futures are traded in all the currency pairs while options are available only for USDINR. The exchange timings are from 9 am to 5 pm. The RBI reference rate arrives by around 12 noon every weekday (excluding Saturdays) for settlements.The exchange stipulated margin stands at around 3 percent of total investment that allows investors/traders to enjoy high leverage.
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Trading is an emotional game, however, it requires discipline. Hence, one should follow the rules in order to take advantage of the forex market.
Rules of investment/trading
1) Do not make any trading decision without a plan.
2) Do not allow emotions to cloud logical judgment.
3) Invest in options with a view to earning returns with a minimal outflow of cash.
4) Trading in currencies (Futures & Options)without a trend is a strict NO-NO.
Stop-losses provide a right guide for investors to minimize the losses, hence, it has to adhere strictly.
There are indications of introducing forex trading in cross currency pairs in India for quite some time. RBI and the SEBI had announced on September’15 of launching three global currency pairs – EURUSD, GBPUSD, and USDJPY on exchanges. The governing bodies had also proposed a change in timings for cross-currency derivatives markets that would be open from 9 am to 7:30 pm, so as to cover Japanese and European market timings and the first hour of the US markets. This proposal is still under scrutiny and will take some time to get implemented.
However, the catch here is introducing these developments in India will not be that easy. Introducing options and cross-currency pairs will have to face numerable issues related to clearance and settlements, compliance, infrastructure, liquidity and above all acceptance. Conversion of options, whether will it be cash-settled or converted into futures, will act as another hindrance.
With retail participation in currencies lesser than the equity markets, the Indian government and other governing bodies have to come out with currency awareness programs to educate traditional investors about the beauty of currency market.
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