Know if Forex Trading is Illegal in India Online | Espresso

Are Forex Trading Platforms Illegal in India?

Forex trading platforms are not legal in India. However, you can engage in currency trading online, subject to regulations and conditions of the forex trading or currency trading market in India. You can only do forex trading online in a limited capacity and through approved mechanisms.

Published on 13 January 2023

Forex trading in India is regulated by the Reserve Bank of India (RBI) and the Securities Exchange Board of India (SEBI), which governs all onshore and offshore brokerage firms.

If you are interested in currency trading online, read this quick guide to understand the intricate mechanism of forex trading in India:

Is Forex Trading Illegal in India?

Forex trading or currency trading is buying and selling national currencies by speculating their prices to potentially earn money. Currency trading occurs in pairs, which implies that one currency is traded for another by speculating whether the value of one currency will fall or rise against the other. Forex trading in India is legal, but forex trading platforms are not legal.

You can undertake forex trading in India through Indian stock exchanges, NSE, BSE and MCX-SX, but with restrictions. These exchanges offer forex instruments for investment purposes. Earlier, Indian stock exchanges only offered four currency pairs – US Dollars (USD), Japanese Yen (JPY), Euro (EUR), Great Britain Pound (GBP).
Also Read: Complete Guide on USD INR Trading

You can trade in these currency pairs by opening a trading account with an authorised brokerage firm in India. In all cases, the base currency will be Indian Rupee (INR). Trading in non-INR forex pairs is not permissible in India under the FEMA (Foreign Exchange Management Act), 1999.

However, in 2015, RBI allowed these Indian registered forex exchanges to offer cross-currency futures contracts and exchange-traded options contracts in three other currency pairs – EUR-USD, GBP-USD and USD-JPY.


What Form of Forex Trading is Illegal in India?

In India, you cannot undertake binary forex trading. In a binary trade, there are two parties – trader and platform, and no role of any exchange. The trader bets on whether a particular currency will rise or fall against the other currency (such as USD against the Indian Rupee). If the speculation is correct, the trader gets a fixed amount. If the speculation is wrong, the platform keeps the money. Since this type of currency trading has no regulating authority or exchanges, it is not legal in India.

That said, there are no restrictions for NRIs (Non-resident Indians) to do foreign exchange in India.


How can You do Forex Trading in India?

As mentioned, you can trade forex with listed Indian exchanges like BSE, NSE, etc., in the available currency pairs in derivatives – futures or options. Indian broker firms registered with the authorised forex trading exchanges can offer legal forex trading services. You can also invest in the equity market overseas, provided it is not margin trading.
Know More about NSE & BSE

To undertake currency trading online in India, you can follow these simple steps:

  • Choose a reliable and SEBI-regulated broker firm to start forex trading in India
  • Open a trading account
  • Complete the required documentation, submit necessary proofs and fulfil KYC formalities
  • Fund your trading account according to the margin suggested by the broker.
  • Obtain credentials, and your account is active for trading in forex.
  • The objective is to use the trading platform for ethical forex trading and earn diligent profits through informed and wise investing strategies.


How to Maximise Potential in Currency Trading Online?

Understand the target market: Currency trading is highly volatile and is influenced by various factors – local and global. Hence, before selecting the currency pair you want to trade in, read about both the countries, the performance of currencies in the past, current political condition, change in leadership, etc. Keep a keen eye on the news and assess how each event or happening affects the currency value.

Choose your forex trading strategy: As the specified forex market is volatile. To ensure you minimise risk and maximise your profit potential, you should carefully choose a forex trading strategy such as price-action strategy, trend trading, breakout trading, range trading, carry trade, etc.

Prioritise two trading currencies: As a wise investor, you should stay focused on two currency pairs that you choose to trade. This will help you understand the dynamics, trends and price-influencing factors for the concerned currency pairs.

Know your limits and set your goals: In forex trading, it is critical to know your upper limit – beyond which you would not be willing to trade. Moreover, trading in currencies by keeping your goals insight will help you choose the right forex trading strategy and approach.
Also Read: Risk Management in Forex Trading Explained

In all, forex trading in India is legal, subject to some restrictions and conditions. Choosing the right broker, keeping currency trading rules in mind and effectively following forex trading strategies will help you make the most from forex trading online.

Chandresh Khona
Team Espresso

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