Is forex trading legal in India?
I get to read mixed opinions on this. As far as I know, an Indian citizen can avail up to $100,000 worth foreign currency for various reasons such as travel, medical expenses. And foreign currency transactions are allowed via banks, Reliance money etc. However, I do not know about the legal implications of forex trading via online accounts. It’s up to the individuals to deal with any taxing or other legal implications for the money that comes via PayPal to your bank accounts.
Forex glossary
Base currency: The primary currency that you are trading or interested in. e.g. in a EURUSD currency pair, Euro (EUR) is the base currency and USD is called the quote currency
Counter currency: Same as the quote currency or second currency in a pair
Buy price (Ask rate): The price at which a buyer can buy a pair
Forex: Foreign Exchange or FX
Leverage: Leverage the loan from your broker that allows you to trade 100 or 200 times of your capital. E.g. it is possible for you to buy 10000 USDEUR with even $100 by applying the right leverage size. This can potentially increase your gains multifold but has the risk of loosing as well.
Lot: Lot is the standard unit of trading. Typically the standard lots are 100,000 units, mini-lots are 10,000 units and micro-lots 1000 units.
Open position: Your current holdings or trades that are not closed yet.
Pip: Pip (or Point) is the smallest price change that can be made on a currency pair quote. For most currencies (except for JPY combinations), the pip is usually a basis point or 0.0001. Hence the price movements are always in units of 0.0001 and smaller values than that. It may be noted that most forex quotes are in four decimal places.
Sell price (Bid rate): The price at which a pair can be sold
Short Position: Going short means that you are opening sell order hoping that the prices of a currency pair will fall. Later you can close that position at lower prices thereby booking profit.
Spread: Difference between the current buy and sell prices.
Stop Loss: The automatic closure price specified just in case your pair moves the other direction than expected. The stop loss order makes sure that you are protected from further losses by automatically closing the open positions at that specified stop loss price.
Forex Tips as shared by experts
Never invest too much initially, start with smaller amounts
Use stop loss effectively to limit your losses
Never use high leverages initially. Stick to x5 to x25 range max. Never leverage 100 or 200 times until you become a pro
Practice a lot on the practice trading account before putting your real money
It is better to start trading on Silver or Gold rather than directly jumping into currency trading. The same platform allows you to trade silver/gold.
Never take emotional decisions. If your pair is loosing, just exit by booking losses. If it’s going up, exit at the pre-decided price rather than waiting for more
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