What is Currency Trading in India

August 4, 2023

What is Currency Trading in India

Currency trading, also known as forex trading or foreign exchange trading, is the buying and selling of different currencies with the aim of making a profit. In currency trading, one currency is exchanged for another at the current exchange rate. While the exchange can be performed for various reasons such as international trade, tourism, or commercial purposes but in currency trading, trades are done for profit. 

While currency trading itself is legal in India, it is important to note that forex trading should be conducted through authorized platforms and brokers that comply with regulatory guidelines. Trading currencies through unauthorized channels or individuals outside of authorized platforms is illegal in India.

The objective of this market is to take advantage of the fluctuations in exchange rates between different currencies. However, the large volume of exchange occurring daily makes currency prices highly volatile. As a result, currency trading is considered a high-risk, high-reward activity.


Currency Trading Time in India

In India, currency trading takes place Monday to Friday, 9:00 AM to 5:00 PM, with the market closing on weekends and other pre-announced holidays by RBI or SEBI.

Currency Trading Strategies in India

Currency trading strategies include Price Action Trading, which focuses on price movement patterns, Trend Trading, which trades with the market trend, and Counter Trend Trading, which makes small gains by trading against the trend. Range Trading involves trading within a specific price range, while Breakout Trading capitalizes on the market breaking out of a previous range.

Following are some of the currency trading strategies:

  1. Price Action Trading
  2. Trend Trading
  3. Counter Trend Trading
  4. Range Trading
  5. Breakout Trading

Price Action Trading: Traders using price action trading rely solely on the movement of the price itself to make trading decisions. They look for patterns and trends in the price action to determine whether to enter a trade.

Trend Trading: Trend trading is a strategy that involves identifying the direction of a trend, upward or downward, in the market and trading in the direction of that trend. indicators such as moving averages or trend lines are used to confirm the direction of the trend. They enter trades when the price is moving in the direction of the trend and exit when the trend starts to reverse.

Counter Trend Trading: This strategy involves trading against the prevailing trend in the market with the aim of making small gains. Traders using this strategy believe that the trend may reverse, and they look for signals such as overbought or oversold conditions to enter trades. They may also use technical indicators to confirm their trade signals.

Range Trading: Range trading is a strategy that involves trading within a specific range of prices. Traders using this strategy identify a range of prices the currency pair is likely to trade within and enter trades when the price reaches the upper or lower end of that range. They exit their trades when the price reaches the opposite end of the range.

Breakout Trading: This strategy involves entering trades when the market breaks out of a previous trading range. Traders using this strategy look for consolidation patterns on the chart and enter trades when the price breaks out of that pattern. They may also use technical indicators to confirm their trade signals.

Types of Currency in India – Currency Pairs Traded in India

There are four types of currency pairs: major currency pairs, minor currency pairs, currency crosses, and exotic currency pairs.  Major currency pairs available for trading in India include the EUR-USD, USD-JPY, and GBP-USD. Indian traders can access currency crosses, including EUR-INR, GBP-INR, and JPY-INR.

  • Major currency pairs have the highest trading volume and liquidity in the forex market. They include the USD paired with other major currencies such as the EUR, JPY, and GBP. 
  • Minor currency pairs are the second most traded pairs after the majors and include important dollar currencies other than the USD. 
  • Currency crosses include currencies such as the EUR, GBP, and JPY but not the USD.
  • Exotic pairs typically include a currency from a developed nation and a currency from an emerging market nation.

In India, retail traders can only buy and sell derivatives of up to seven forex pairs through exchange-traded currency futures and options.

How to Trade in Currency in India

  1. Trading in currency requires a broker like Alice Blue.
  2. Trading accounts require personal and financial information.
  • Aadhaar, passport, PAN, or driver’s license are required for identity and address verification.
  • After verification, you can fund your account via bank transfer, debit or credit card, or other methods.
  1. Before trading with real money, practice with a demo account.
  • A demo account is an account that allows you to trade with virtual and you can test whether your strategy is working well or not.
  1. Once you are confident with your trading strategy, start trading with real money.
  • Choose a currency pair that you are familiar with and analyze the market before making a trade.
  • Set a stop loss and take profit to manage your risk and reward. Keep track of your trades and analyze your performance regularly.

Quick Summary

  • Currency trading, also known as forex trading, involves buying and selling different currencies with the aim of making a profit.
  • The currency market timing is 9:00 AM to 5:00 PM and operates from Monday to Friday, and is closed on Saturdays, Sundays, and other trading holidays declared by the RBI or SEBI.
  • Currency pairs traded in India include USD/INR, EUR/INR, GBP/INR, JPY/INR, and others. These pairs represent the exchange rate of the Indian rupee against major global currencies.
  • Currency trading is a high-risk, high-reward activity due to the highly volatile nature of currency prices.
  • There are several currency trading strategies in India, including price action trading, trend trading, counter-trend trading, range trading, and breakout trading.
  • In India, retail traders can only buy and sell derivatives of up to seven forex pairs through exchange-traded currency futures and options.
  • Open Currency Trading Account with Alice Blue & start trading at just ₹ 15/order.

Frequently Asked Questions

1. What is Currency Trading in India?

The act of purchasing and selling foreign currencies with the intention of making money is known as currency trading in India. It usually involves exchanging one currency for another at a predetermined exchange rate through a broker or financial institution.

2. Is currency trading profitable in India?

Currency trading can be profitable in India, but it is important to have a solid understanding of the market and the risks involved. Success in currency trading depends on market knowledge, strategy, risk management, and discipline.

3. How do I start trading currency?

To start trading currency, you need to open a currency trading account with a broker like Alice Blue, do some research and analysis on currency pairs, and develop a trading strategy. You can use various tools such as charts and news feeds to assist in your analysis. With Alice Blue’s 15 Rs brokerage plan, you can save up to ₹ 1100 brokerage every month. 

4. Which broker is best for currency trading in India

Before choosing the best broker for currency trading in India, consider factors such as regulation, reputation, trading platform, costs, and customer support. Conduct thorough research and compare brokers based on these criteria to make an informed decision.

5. Is currency trading taxable?

Yes, currency trading is taxable in India as it is a speculative business income. The profits earned from currency trading are added to an individual’s total income and taxed at the applicable income tax rates.

In India, trading currency pairs that include the Indian rupee (INR) is legal. This includes pairs such as GBP/INR, USD/INR, JPY/INR, and EUR/INR. Cross-currency pairs like GBP/USD, USD/JPY, and EUR/USD are also permitted. However, it is prohibited to trade Contract for Differences (CFDs) and binary options in India.

Leave a Reply

Your email address will not be published.

Blog Categories
Kick start your Trading and Investment Journey Today!
Related Posts

Objectives Of Portfolio Management

The main objective of portfolio management is to help investors allocate assets into different investment classes in such a way that they can protect their

What Is ADX In the Stock Market?

The Average Directional Index (ADX) in the stock market is a technical analysis indicator measuring trend intensity. It ranges from 0 to 100, with readings

What Is a Price Band?

A price band is a predetermined range within which the trading of a particular security, stock, or asset is allowed. During IPOs in the primary