- What is Forex Trading
- Understanding How Forex Works for Beginners
- Forex Trading Strategies for in India
- List of the Best SEBI Regulated Forex Brokers 2024
- How to Choose the Best Forex Broker in India
- Customer Service
- Regulation and Security
- Data Security
- SSL Encryption
- Two-Factor Authentication
- Deposit and Withdrawal
- Broker Types
- Dealing Desk Broker
- ECN Brokers
- Transaction Costs
- Trading Platform
- Mobile Trading
- Trading Style
- Time frame
- Automated Trading Vs. Self-Directed Trading
- Managed Accounts
- Social Trading
- Order Execution Quality and Slippage
- Market Orders
- Limit Order
- Range of Trading Instruments
- Custom Tools and Add-ons
- Demo Accounts
- Order Types
- Educational Materials
- Online Trading Regulation in India
What is Forex Trading
Forex trading involves purchasing and selling currencies to make profits. The transaction occurs between a pair of currencies, each represented by three letters.
The first two letters represent the country’s name, while the third represents the currency name. For example, the Indian Rupees: INR, Canadian Dollar: CAD, United States Dollar: USD, Great Britain Pound: GBP, and Australian Dollar: AUD, among others.
The Forex market is global, decentralized, and liquid,, with many participants, including brokers, enteral, and commercial banks.
The foreign exchange departments in major banks are globally linked to a 24-hour schedule. The primary foreign exchange commercial centers are New York, London, Frankfurt, Amsterdam, Paris, Milan, Bahrain, Toronto, Tokyo, Singapore, and Hong Kong.
The Reserve Bank of India (RBI) monitors the market movements and can intervene if necessary, per government policies.
Understanding How Forex Works for Beginners
Forex works in an over-the-counter (OTC) market divided into three types, including spot, viz, forward, and futures Forex markets.
As mentioned, Forex involves selling one currency to purchase another, and the currencies are quoted in pairs. The first is the base currency, and the second is the quote currency. In other words, the price of a pair is how much the base is worth about the quote currency.
There are four major types of currency pairs in the Forex market.
- Major pairs: They are the most highly traded and add up to 80% of the Forex trading globally. They include GBP/USD, USD/CAD, USD/CHF, AUD/USD, and USD/JPY.
- Minor pairs: They are not traded often like the major pairs. They feature two major currencies except for the USD. Examples are EUR/CHF, EUR/GBP, and GBP/JPY.
- Exotic pairs: Comprise of major currencies against those from small economies like GBP/MXN, USD/PLN, and EUR/CZK.
- Regional pairs: Are classified according to region, e.g., AUD/NZD, EUR/NOK, and AUD/SGD.
Suppose you are an Indian trader and want to take advantage of the increasing price of the United States dollar. The current market price of the dollar is INR60, and you predict that in a few months, it will rise to INR65.
You can enter the market and buy USDINR by taking a long position. If the price eventually hits 65 within the contract period, you make INR5 profit for every dollar. That means you can earn INR5000in a single contract of $1000.
Forex Trading Strategies for in India
There are different trading strategies that you can employ to help you place successful trades. Let us look at each one of them.
Price Action Strategy
Price action is the most popular and commonly used trading strategy globally. It comprises the bull and bears of the price action. For instance, bullish and bearish candles will form using the candlestick chart depending on the price action in currency trading. This strategy can be used in all types of market conditions.
When using this strategy, you must check out the market price movement and decide when to enter the market. You can utilize online tools such as indicators, moving averages, stochastic, etc. They help you in doing analysis.
Counter Trend Trading
This strategy is the opposite of trend trading. Here, you trade against the current market price movement, hoping that the trend will reverse. Of course, you must do your analysis first based on history, news, or online tools.
Sometimes the markets experience a breakout, which could lead to high profits. A breakout occurs when the market emerges from its previous trading range. Therefore, in this strategy, traders enter the market during a breakout.
This strategy is mostly used by highly experienced traders who can analyze the charts at the end of the day. To master this strategy, you must have a strong grasp of the market dynamics.
Range strategy involves making a trade-specific range of currency prices that helps identify the most favorable price conditions. The price levels depend on the demand and supply of those currencies.
Carry trade is entirely based on interest rates. Traders sell currencies with low-interest rates and ones with high-interest rates. If executed properly, this could be a successful strategy.
List of the Best SEBI Regulated Forex Brokers 2024
The Securities and Exchange Board of India (SEBI) is a regulator appointed by the Indian Government.
It gained its statutory powers in 1995 and is responsible for supervising and regulating financial entities in the security market. SEBI also oversees the brokers’ events and activities to ensure they operate transparently and with integrity.
Besides, the regulator ensures that the Indian market’s stability is unaffected. The brokers regulated by SEBI are frequently supervised and regulated for possible financial discrepancies. As such, it has led to the cancellation of licenses or hefty fines for those who do not adhere to SEBI’s rules.
Our experts did the hard work for you; we took every word we heard about Indian forex brokers with a pinch of salt and decided to test them with real money.
We tested every aspect of the broker, such as spreads, banking options, speeds, and trading platforms. Below is a list of the best Forex brokers in India.
How to Choose the Best Forex Broker in India
With multiple brokers currently available, choosing the right one may require you to sift cautiously through several internet advertisements and magazines.
Choosing a safe broker that perfectly fits your trading needs is crucial for successful and profitable trading. This article will investigate a few factors to consider when choosing a Forex broker in the competitive market.
The competence of any Forex broker in dealing with technical or account issues is as crucial as their performance in executing trades. Going for a Forex broker who can be contacted easily when a problem arises is important. A reliable broker should have 24/7 customer support, especially on live chat.
When researching, a quick call can help you know what customer support they offer. Besides, you will be able to gauge their wait time and the representative’s ability to answer questions regarding the company, leverage concisely, spreads, and regulate.
The best Forex broker for Indians should offer multilingual customer service, preferably including Hindi.
Regulation and Security
Regulation and security are among the key factors to consider when choosing a Forex broker. Finding a reliable and trustworthy broker is not straightforward.
It is worth noting that a professional-looking site does not guarantee that the broker is regulated. Forex trading brokers in India must be SEBI regulated and authorized by reliable authorities that follow the Foreign Exchange Management Act (FEMA) regulations.
According to SEBI, Forex traders in India should not invest in currency pairs that do not have INR as the quote or base currency. Specific SEBI-regulated Forex trading brokers often offer traders the opportunity to invest in foreign countries.
However, most Indian brokers only allow you to trade on INR currency pairs. If a broker guarantees to provide other currency pairs, check out the broker’s legitimacy in India. Also, ensure that their services and offers align with the SEBI’s regulatory guidelines.
When opening a live Forex trading account with a broker, you provide many financial and personal data. Most brokers will require copies of your ID/passport, information on your bank account, credit card number, and utility bills.
Poor internet security practices could lead to third parties accessing your financial data, disrupting trading activity, and identity theft. You should ensure that your broker has employed a highly reputable internet security firm.
Every top-rated broker in India should be Secure Sockets Layer (SSL) certified. The technology ensures that all financial and personal information is safe from access by third parties.
Two-factor authentication is a security feature that makes it difficult to hack traders’ accounts. Most brokers will require you to provide a username and password and a unique security code that is randomly generated.
Deposit and Withdrawal
Each Forex broker has specific account funding and withdrawal policy. Some other standard payment methods in India include:
- EWallets such as Neteller, Skrill, and Paypal
- Credit cards often restricted to Mastercard and Visa
- Bank transfer, broker-to-broker transfer, and wire transfer
To start real account trading, brokers require you to make an initial deposit in your account. The minimum deposit varies with different brokers, but most offer reasonable limits.
Always ensure that your preferred broker offers payment methods that are convenient for you. Besides, go for Forex brokers that accept Indian rupees. Also, read the deposit methods for Indian bettors at Indian betting sites.
Most Forex brokers do not offer trading bonuses as SEBI restricts them from doing so. However, some brokers offer non-trading incentives like refer a friend bonus.
This means you receive a bonus for every friend you invite, depending on the broker’s policy. When choosing a broker, it is good to check out such offers as they help boost your bankroll.
Another essential factor to consider when opening a retail trading account is the type of brokers. It is a crucial decision since the type of broker you choose affects your transaction fees and spreads the quality of service you receive. There are two main types of Forex brokers.
Dealing Desk Broker
Dealing desk Forex, brokers are also known as market makers. They provide fixed spreads and can elect to quote below or above the market price whenever they want to.
Since they set the bid and ask price, they offer their client’s fixed spreads. It means that a trader does not see real interbank rates.
However, with the advanced technology and competition in the market, the rates offered are the same as the interbank rates. Market makers are counterparties of traders who do not trade directly with liquidity providers.
They are paid via spreads and usually take the opposite trades of their customers to minimize their risks.
ECN brokers provide a platform for market participants and allow them to trade against each other. They provide the best bid and ask prices, and orders are matched with the highest possible prices.
The ECN brokers can make a connection between different participants, including banks, traders, hedge funds, and even other brokers.
The nature of the business makes charging spreads difficult, which is why they will charge a small fee to connect the different participants. ECN brokers typically have more significant deposit requirements than most other broker types.
All Forex traders are always subject to transaction fees regardless of what type of currency trader they are. Each time you enter a trade, you must pay for either commission or spread.
It is good to look for brokers with the most affordable rates. However, it might be necessary to sacrifice low transaction fees for a more reputable broker. Some market makers do not charge fees and commissions.
They often earn from spreads; hence you should check how many pips they charge per trade.
In volatility, the markers use requotes, which means trades are executed at a different price, and clients eventually pay more pips than average. If you are a day trader, it is advisable to trade on fixed spreads depending on the news.
Although they are higher, you are guaranteed that your trades will be executed at the agreed price. All in all, no matter the fees, commissions, or pips a broker charges, the golden rule is to investigate the broker’s regulation and security thoroughly.
In Forex trading, activities take place in a broker’s trading platform. The first thing to check out is whether the platform is user-friendly. You should also ensure its stability in terms of performance since it is a portal to the market.
A well-designed trading platform should be visually pleasing, have a vast range of fundamental and technical analysis tools, and be easy to enter and exit a trade.
Besides, it should have clear buy and sell buttons and a panic button that closes all the running positions. A poorly designed platform can lead to order entry mistakes that may be costly, so you should be cautious about this factor.
Before trading for real money, you can sample all these through the demo account.
Mobile trading has become popular recently, and some investors love trading on the go. A top broker should offer a mobile trading option to inform of an app or a browser-based platform.
The mobile apps should be optimized to simplify trading and contain all the products and services available in the desktop version. Before opening a live account, ensure the mobile app is user-friendly and stable.
You can test its usability and performance in the demo account.
Your trading style will greatly determine the type of Forex broker that best suits you.
If you are a short-term Forex trader looking forward to scalping a few pips, your broker should have a Currenex account. The accounts come with very low spreads, institutional-grade trading software, and access to the deepest liquidity of the interbank market.
Conversely, if you are a long-term trader who wants big moves in exchange rates, you may not be cautious about trade execution speed or spreads.
You will be more sensitive to your broker’s overnight interest rates. Studying the broker’s policies and overnight charges before investing with them will be essential.
Automated Trading Vs. Self-Directed Trading
If you love to use automated trading strategies, you should ensure that your broker provides the necessary integrations in their software platform. Forex brokers with Metatrader 4 offer “expert advisor” integration.
Other automated trading systems include MQL5 from Hot Forex and Signal Trader from Avatrade.
Your broker should provide significant technical and fundamental analysis for a self-directed discretionary trader. They help you in making trading decisions.
Traders who want to manage some or all of their money by professionals should look for brokers offering PAMM (Percentage Allocation Management Module) accounts. For instance, Hotforex allows traders to select from over 300 vetted managers who are supposed to co-invest in the strategies.
Social trading has been a fast-growing trend in the past few years. It allows you to discuss trading strategies with other traders and even copy trades from experienced investors.
Only a few brokers allow this trading strategy. Further, the engagement level significantly differs among the brokers.
Order Execution Quality and Slippage
Forex trading markets are volatile, and selecting a broker with minimal slippage and fast execution is crucial to a trading strategy’s success.
Slippage is the difference in the price expected once an order is placed and the price at which the trade is executed. To avoid often slippage, traders always look for brokers with fast execution.
For fast order execution, brokers use fiber optic cables to connect to primary liquidity providers like banks and financial institutions.
Equinix servers in London and New York enable brokers to attain low latency independence of their location, with the data centers located in key financial hubs.
The market limit and order are compared to get a good broker with minimal slippage. Market orders are commonly used for automated trading and are placed at the current market value.
These are executed automatically when a trader’ preset sell or buy price has been met. The limit order execution varies with different brokers; some are executed faster than others.
Range of Trading Instruments
When choosing a Forex trading broker, it is essential to check out their range of trading instruments. Always go for brokers with a wide range of instruments. There are different categories of Forex trading instruments as follows:
- Currencies (FX): Most brokers give you access to the Forex market five days a week, 24 hours a day, allowing you to trade on minor, major, and exotic pairs. The more comprehensive the range of currency pairs a broker offers, the better.
- Metals: Precious metals are potential safe-haven assets for traders during market volatility or uncertainty.
- Stocks: Forex trading price movements of shares from large companies like Apple and Tesla allow you to access the company stock without purchasing them outright.
- Commodities: You can trade on popular commodities like gas and oil without purchasing them outright. It is a perfect way of diversifying your portfolio.
- Indices: If you trade indices with a leading broker in the market, you will have access to the best selection of indices. Some brokers offer CFD trading spot indices among the world’s active securities, which means you can choose to sell or buy indices at their spot price to match your trading strategy.
- Cryptocurrencies: These are a disruptive sensation in the Forex markets. Cryptocurrencies are digital currencies that provide more opportunities to traders, and most turn them into alternative investments. Depending on your preferred broker offers, you can trade on Bitcoin, Litecoin, Ethereum, or Ripple against the INR.
Custom Tools and Add-ons
For protection against the high risk of Forex trading and market volatility, most traders look for brokers with a decent selection of risk management tools in demo accounts and order types. They also offer educational materials to help traders acquire more knowledge.
Using a demo account is essential whether you are an experienced or new trader. It helps you test the trading strategies and familiarize yourself with the platform before opening a live account.
Since you can test the trading robots and other strategies, demo accounts help minimize the high risk of trading. While some brokers offer virtual trading balances and unlimited access, some demo accounts limited virtual funds and time restrictions.
Order types can enable you to minimize losses whenever the price movements go against your will. While most brokers provide basic order types like Stop Loss and Market orders, not all offer Guaranteed Stop Loss Orders or advanced orders.
Some brokers will allow you to place GSLOs orders, and you are guaranteed that the trade will be closed at your specified price. This is regardless of market volatility or gapping.
If you require GSLOs or advanced orders, it is essential to confirm whether your preferred broker offers such.
Most brokers will offer a combination of eBooks, articles, videos, webinars, e-courses, and seminars free of charge. It is worth noting that the quality of these materials differs significantly; hence, the comparison is essential.
With individual brokers, there are exclusive offers for higher-tier accounts. Some will offer VIP access to the dealing rooms. You are given a specialist who gives you a one on one training and advises you on trading strategies.
Online Trading Regulation in India
Forex trading in India is legal. The principal stock exchange regulator is SEBI. Several rules and regulations have been imposed on SEBI-regulated Indian brokers. As mentioned earlier, Indian Forex traders should not invest in currency pairs that do not have INR as the quote or base currency.
It is illegal for any Indian to send INR to an overseas country for currency investment or conversion under the Foreign Exchange Management Act (FEMA) unless with Government approval.
Converting INR to another currency for Forex trading with an overseas broker is illegal. It can attract high fines or even imprisonment.
Forex brokers must follow all the regulations imposed by SEBI and FEMA, failure to which they may face severe consequences. There are various restrictions imposed by SEBI on the types of trades, maximum available leverage, and the rules that govern exotic currency pairs.
Forex trading in India was private for financial institutions, the Reserve Bank of India, and other banks. With time, small financial institutions and individuals started to indulge in Forex transactions for investment opportunities and global business.
As a result, Forex trading quickly gained immense popularity. Today, Forex trading plays a great part in the economy of India.
Yes! The Indian Government has legalized Forex trading. Most brokers are regulated by SEBI, which is the principal stock exchange regulator in India. However, not all Forex brokers are regulated; hence it is good to do thorough research before investing real money.
The minimum amount needed to start Forex trading depends entirely on the broker. Some brokers allow you to start with as little as INR75 for a standard account while others have higher minimum deposit limits. The amount also varies depending on the account type where VIP accounts require high deposits.
Leverage enables one to trade with more money than they have in their account. If you have INR100 in your trading account, with leverage of 1:100, you can trade with volumes worth INR100000. Leverage can help grow your account fast or destroy it. Trade with leverage that your trading system and strategy accommodates.
Spread is the difference in the sell price and the purchase price of a currency pair. Spreads are built on trades and are charged when you place a trade. It would be best if you, therefore, went for brokers with small spreads.
No, demo accounts are not rigged. The fact is that from an emotional standpoint, a demo account is different from a live account. If you make a little mistake in a demo account, you are less likely to feel the pinch like in a live account. That is why it feels like demo accounts are rigged.
Not all Forex trading courses are helpful, as some tutors are only interested in making money from it. It is advisable to stick to the free education provided by your preferred broker or that of baby pips. After that, practice on a demo account until you feel you are good to start live trading.
It depends on where you are getting the signals. You can subscribe to reliable providers like the “Forex signal forecasts” for better results.