FOREX is a word made by two separate words, Foreign Exchange. In today’s life almost all of us do Forex transactions in some or the other way. Forex instruments and the Forex changes are one of the most liquid markets globally, the average daily transactions exceeding as high as $6.5 trillion.
How to make money from Forex trading in India?
In India, Forex trading is done via two routes.
1. OTC – Over the Counter
2. Exchanges – Stock/Commodity Exchanges
OTC route is usually for the banks/NBFCs and institutions to execute various types of transactions across various currency pegs. For retail investor/traders execution via stocks/commodities exchanges is the most cost and time efficient way.
Now, retail participants can do the Forex transaction via any NSE/BSE/MCX registered brokers. Once the account is activated, simply add the funds to your account and you are set to go with the trading experience.
Top 5 brokers for account opening:
1. Zerodha (Discount Broker)
2. Upstox (Discount Broker)
3. SAMCO (Discount Broker)
4. 5paisa (Discount Broker)
5. Prostox (Discount Broker)
While discount brokers have excellent technological mediums to offer to their clients and account opening process is also very simplified, there are some key takeaways which one must consider before make a choice between the discount brokerage account and the full service brokerage.
1. The trading margin (Leverage) is limited and fixed for all clients,
2. No access to research reports with discount brokerage.
3. No guidance by relationship manager (if you are new to the trading, you might need a helping hand)
4. Most important, they charge mostly on “Per trade” basis, NOT “Per lot” or on some percentage of traded value basis. It may suit some, may not be a good option if your trade quantity is small.
On the other hand, Full service brokers offer a bundle of services, though that too has its own pros and cons. Here is what you can expect.
1. Relationship manager or dealer support to walk you through the complexity of “Futures” and “Options”
2. Full service broker can allow extra leverage (based upon customer profile and business relationships)
3. Daily & weekly research reports to help you in decision making.
4. They most charge some percentage of total traded amount as their brokerage. This may be a very good option if your traded lots (quantity) is small in the starting.
As you can see, there is no one size which can fit all. So, it’s always better to calculate your model before you start with the any of the broker.
As of today, in India the allowed currency trading pairs are
Also remember the trades are only allowed in the derivatives market (Futures and Options) only. Since F&O is a highly leveraged product, always calculate your risk and reward before taking any trade.