Currency Trading in India : Overall Information from Basics

Currency Trading in India

Currency trading is known as FOREX market. Here the currencies of the entire world are traded with the decentralized or OTC procedure. They are traded on platforms offered by BSE, NSE, MCX-SX and USE (united stock exchange). It is said that FOREX market is open 24*7 because it is a decentralized business and hence with different time zones in different parts of the world it can be said that FOREX is traded 24*7. Forex firstly opens in Australia then in Europe and then in North America. Hence when the market of one country closes another one begins trading. Approximately 5 trillion dollars worth of trading is done daily on FOREX platforms. If we combine the

The well known currencies that are traded are USD, CHF, JPY, CAD etc. 

Currency Trading in India

Currency trading in India has been allowed since August 2008. SEBI allowed NSE to launch the currency trading derivative. The well known derivatives for Indian markets are USDINR, EURINR, GBPINR and JPYINR.  In October 2008 BSE was also allowed to launch currency derivatives.

The trading time in Indian FOREX markets is 9 am to 5 pm. The currency trading in India is of two types : 

  • Indian Currency (USDINR etc.) – Trading Indian currency with other currencies of world
  • Cross Currency (USDJPY etc.) – Trading two different currencies of the world (except indian currency)

The margin in Currency trading is 25-30x but the risk in currency trading is very less. The reason it is less risky is because the movement in the currencies is maximum 20-30 paisa per day. Brokerage is also very less in currency trading with approximately 0.003% – 0.005%.

How Forex Works ?

Let’s understand with a very basic example. I went to the US for some work purposes and for going there I converted my Indian rupees in US dollars for the daily extra expenditure over there.I converted 1 lakh Rs. to dollars amounting to 1389 $ (approx.) at the rate of 72 Rs. per 1 $. 

Now due to corona I have to return back. My basic expenditure there was done entirely by my clients and I didn’t spend anything on my own. Hence I returned with the entire 1389 $ and on returning I went to exchange the same. Now while converting my dollars into INR I got 105500 Rs (approx.) in place of Rs. 100000 (which was paid originally) because now the rate of dollar has increased to 76 Rs. per dollars . Hence I gained 5000 Rs extra from exchanging my dollars due to the rise in value of Dollar in comparison to Indian Rupee. 

This is how currency trading works as well. Here this is not trading regarding currency but this is the exchange process and how it works. The fluctuations in currency trading is due to the supply and demand in the currencies across the world. 

Now if the value of one currency increases then the currency associated with it diminishes in value. For example in USDINR pair if the value of dollar increases the value of INR would definitely go down. 

Who Does Currency Trading ?

The currency trading is majorly done by the government, central bank or big banks or big financial institutions and retail traders, companies working overseas (majorly involved in hedging). 

Companies doing overseas trading do it so that the changes in the policies of the overseas countries does not affect their cash flows. 

What Is Pip ?

It is the minimum number of points in which a currency move is marked. Small changes in decimal numbers can also cause large numbers of changes in a country’s currency. In India one USD moves at a pip of 0.0025 Rs. Hence in comparison to USD if the currency of India rises by one pip then the previous 1 $ = 75.8000 Rs. now becomes 1 $ = 75.8025. 

Forex Trading

Forex trading has become very common because of the discount brokers who made the entire trading online feature easier. In India the best currency trading brokerage and margin is provided by discount broker Zerodha. All you need to do is open a demat account with Zerodha and then start currency trading in Zerodha’s software KITE or its online portal.

Forex trading can be done in two ways. If the person does positional trading then the trade is done under the head MIS and if the trading is done for long term then it is known as normal trading and is done under the head NRML. 

How to Do Trading ?

The first to know is the term currency pair. USDINR is a currency pair. In this pair the one which comes first is known as base and the later one is known as counter. Here USD is base and INR is counter. This says how much one US dollar is worth in INR. 

Currency trading is a range bound trading. Hence if today the US dollar is 75 then it has a maximum range of movement limited to maximum of  RS. 3 – 5 and not more than that. All you need to remember is buy at low and sell at highs. Hence if you see that the price has gone down then buy it (72 Rs. in our example) and if it has gone very high (78 Rs. in our example) then sell it. 

For trading you need to select any future for a currency pair and open it. Then visit the chart and follow the strategies listed below and decide entry and exit points based on individual profit margin and risk appetite. Example – For USDINR DEC future I would opt for USDINR DEC FUT and perform buying or selling on basis of the current day trade cycle.

Best Trading Strategies

The best currency trading strategies are :

    • GAP SCALING – It is just a 15 minute trading technique. It is done exactly at the point where most of the Movement for a day is expected in the currency.
    • GAP TRADING – It is intraday trade done on large gaps from opening and per hour movements.
    • SWING TRADINGIt is for the positional traders. All a person needs to do is to follow Bollinger bands, MACD and MFI for pursuing entry and exit in any trade.

Also it is advisable to follow VWAP and keep it as a major trigger point for buying and selling. Also one should book any profit above 0.5% and exit the trade. 


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