Eureka Securities

First a clarification — Foreign Exchange trading or Forex trading in India is illegal. It may sound a little surprising and strange that why should there be an article about what is not allowed?

Let me explain- there are lot of offshore online portals based in countries that are considered to be tax havens and are outside the purview of Indian legal framework that allow an individual to trade online in foreign currency with a small margin; however that is not allowed by the RBI.

These portals advertise aggressively and try to lure customers with promise of high returns by making a small investment but remember apart from being illegal these dealings can be fraught with operational risks.

What RBI allows and is generally understood as Forex trading in India is trading in currency derivatives. So now that we understand that trading in only forex derivatives is permitted by the Indian law let us get an overview about the rules and procedures that govern this trade in India.

The framework for trading in derivatives has been set up by the RBI and SEBI while the legal guidelines are provided by FEMA Foreign Exchange Management Act provides the legal guideline for. Forex trading in all derivatives is online and requires completion of certain formalities before you can start trading in them.

Almost all leading banks and many other financial institutions provide you with a platform for currency trading. In a few instances the bank may change this depending on market volatility. Forex trading is normally done on the margin trading principles. That means you can trade for a bigger amount with a relatively smaller deposit.

Currency Exchange | Buy or Sell Currency & Online Currency Converter

Trading in markets requires you to stay alert and updated; always keep abreast about the change in guidelines or other relevant information. Most reputed and established intermediaries provide a lot of information to the client be it in the form of emails, tickers on the site, mobile alerts and so on.

However as a customer it is you job to go through the information provided and use it your advantage. Currency derivatives help you to diversify your portfolio and for those dealing in foreign exchange they can be an effective tool for hedging.

In Forex trading you are always offered a quote of spread. That means you are offered by your broker a buying price and selling price for a specific currency pair.

If you accept that spread the trade is executed by the broker and you need not go to the exchange trading floor for the trading. Nidhi is an ex-banker with a passion for writing and reading. She now combines her banking experience with her love for writing and pens articles for various financial sites.

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