August 5, 2023

How to Trade Currency in India

How to Trade Currency in India

To trade currency in India, investors must adhere to specific guidelines and regulations to ensure compliance with the country’s financial laws. Here are the steps to trade currency in India:

  1. Opening a trading account: Choose a broker like Alice Blue that is registered with the SEBI and lets you trade currencies.
  2. Provide Know Your Customer (KYC) documents: You will need to submit your KYC documents, such as Aadhar card, PAN card, and bank statements, to open a trading account.
  3. Fund your trading account: After your trading account is opened, you can fund it with the amount you want to trade in currency. Most brokers offer multiple payment options, such as net banking, debit card, and UPI.
  4. Choose the currency pairs: Currency trading in India is mostly done in pairs such as USD/INR, EUR/INR, and GBP/INR. Choose the currency pairs you want to trade in based on your market analysis.
  5. Place your order: Once you have chosen the currency pairs, you can place your order through the broker’s trading platform. You can place orders such as market orders, limit orders, and stop-loss orders.
  6. Monitor your trades: After you have placed your order, monitor the trade and exit it when you reach your profit or stop-loss targets.

Contents:

Currency Trading in India

Although a lot of people are aware of equity trading not everyone knows the concept of currency trading. It is a highly dynamic market where foreign currencies are involved and you need to locate the right opportunities to gain lucrative investment returns. 

In India, traders can trade in a wide range of currency pairs, including majors, minors, and exotics. Majors are the most commonly traded currency pairs, including USD/INR, EUR/INR, GBP/INR, and JPY/INR. 

Minor currency pairs are less liquid and include crosses such as EUR/GBP, EUR/JPY, and GBP/JPY. Exotic currency pairs are those that are not widely traded, such as USD/TRY, USD/ZAR, and USD/BRL.

For example, let’s say you’re interested in trading USD/INR. The USD/INR pair is the most commonly traded currency pair in India and is known for its liquidity and volatility. By analyzing technical indicators and economic events, you may decide to enter a long position on USD/INR. However, it’s important to always keep an eye on market conditions and be prepared to exit the trade if necessary.

Benefits of Currency Trading

Benefits of Currency Trading include:

  • High liquidity and trading volumes
  • Diversification and risk management opportunities
  • Lower transaction costs compared to other financial markets
  • The potential for high returns and profit opportunities

High liquidity: The forex market is the largest and most liquid financial market in the world, with a daily trading volume of over $6 trillion. This means that it is easy to buy and sell currencies quickly, and traders can enter and exit positions with ease.

Low barriers to entry: It is relatively easy to start trading currencies as the minimum investment required is usually low, and numerous online brokers offer trading platforms.

Diversification: Currency trading allows traders to diversify their investment portfolios and hedge against currency risk in other investments.

Potential for profit: Like any other form of trading, currency trading can lead to profits if done correctly. However, it is important to note that forex trading is highly risky, and traders should be aware of the potential for significant losses as well.

List of Currency Trading in India

In the Indian currency trading market, seven currency contracts are available. These currency pairs include 

  • GBP/INR
  • GBP/USD
  • USD/INR
  • EUR/USD
  • JPY/INR,
  • USD/JPY
  • EUR/INR.

Currently, in the global foreign exchange market, India has an average daily turnover of over $400 billion. The National Stock Exchange, Bombay Stock Exchange, and Metropolitan Stock Exchange facilitate all currency pair trading. Furthermore, the currency market is being regulated by the SEBI and RBI. 

Best Time for Forex Trading in India

If you are dealing with United States dollar-related currencies, trading between 5:30 PM to 8:30 PM is the best option. At this time, the United States trading market and the European trading market intersect, and hence you can easily get the highest trading volume while dealing with USDJPY, EURUSD, GBPUSD, etc. 

Forex trading is a 24-hour market, but that doesn’t mean that every hour is equally good for trading. The market hours are divided into four major sessions: the Sydney session, the Tokyo session, the London session, and the New York session. The best time for forex trading in India is when these sessions overlap, providing high liquidity and increased trading opportunities.

Sydney and Tokyo Session Overlap

The Sydney session starts at 5:30 AM IST and closes at 12:30 PM IST. The Tokyo session begins at 5:30 AM IST and ends at 2:30 PM IST. During this time, the currency pairs that involve the Australian dollar and the Japanese yen are the most actively traded.

London and Tokyo Session Overlap

The London session begins at 12:30 PM IST and closes at 8:30 PM IST. The Tokyo session begins from 5:30 AM IST to 2:30 PM IST. During this time, the currency pairs that involve the British pound and the Japanese yen are the most actively traded.

New York and London Session Overlap

The New York session starts at 5:30 PM IST and closes at 2:30 AM IST the next day. The London session starts from 12:30 PM IST to 8:30 PM IST. During this time, the currency pairs that involve the US dollar and the British pound are the most actively traded.

Trading during the overlap of two sessions means that there are more traders in the market, leading to higher liquidity, which results in lower bid-ask spreads. Lower spreads mean lower transaction costs and thus, more profit potential for traders.

Here’s a table to summarize the best times for forex trading in India based on the major currency pairs:

Currency PairBest Trading Time in IST (Indian Standard Time)
USD/INR9:00 AM – 5:00 PM
EUR/INR9:00 AM – 5:00 PM
GBP/INR9:00 AM – 5:00 PM
JPY/INR9:00 AM – 5:00 PM
AUD/INR6:00 AM – 2:00 PM
CAD/INR6:00 AM – 2:00 PM
CHF/INR6:00 AM – 2:00 PM

(Note that the above timings are subject to change depending on various factors such as daylight saving time and global events affecting currency markets. It’s always a good idea to stay updated on the latest market news and adjust your trading strategy accordingly.)

Quick Summary

  • Currency trading involves buying and selling currencies to profit from fluctuations in their exchange rates.
  • In India, currency trading is regulated by the Reserve Bank of India (RBI) and can only be done through authorized dealers.
  • There are several benefits to currency trading, including the ability to make profits in both rising and falling markets and the availability of high leverage.
  • Some popular currency pairs for trading in India include USD/INR, EUR/INR, and GBP/INR.
  • The best time for forex trading in India is usually during the overlap of the European and US trading sessions, which is around 5:30 PM to 8:30 PM IST.
  • To start trading currency in India, you must open a trading account with an authorized dealer like Alice Blue and complete the necessary KYC (Know Your Customer) requirements.
  •  According to the RBI, the average daily turnover in the Indian foreign exchange market was $ 116.5 billion in April 2020. The Indian rupee is also one of the most traded currencies in the world.

Frequently Asked Questions 

How to trade currency in India?

Currency trading in India can be done through authorized brokers like Alice Blue. The trading usually is conducted between 9:00 AM to 5:00 PM and a trader needs to open a trading account withr Alice Blue to invest in the currency market.

Yes, trading in currency is legal in India. The Reserve Bank of India (RBI) regulates the foreign exchange market in India and allows authorized dealers and banks to trade in foreign currencies.

Is trading in currency profitable?

Trading in currency can be profitable, but it also involves risks. According to a survey conducted by the Bank for International Settlements (BIS), the average daily turnover in the Indian forex market was around $34 billion in 2019, indicating significant potential for profit in currency trading.

How can I invest in foreign currency from India?

Indians who want to invest in foreign currencies can do so through banks or authorized dealers such as Alice Blue. The RBI has authorized several banks and dealers to facilitate forex transactions in India. Individuals can open a forex trading account with any of these authorized dealers or banks and trade in currencies online.

Which currency is the easiest to trade?

The US dollar (USD) is considered the easiest currency to trade, as it is the most widely traded currency in the world. If you are considering the easiest currency pair, then you will have to opt for EURUSD.

Which currency is the highest in trading?

The US dollar (USD) is the most traded currency in the world, accounting for around 88% of the daily turnover in the global forex market. In India, the USD is the most commonly traded currency, followed by the Euro (EUR) and Japanese Yen (JPY).

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