Forex trading legal
The legality of forex trading in India has always been a contentious topic. Forex trading in India is subjected to various restrictions and limitations. These rules and regulations are maintained to safeguard its people from losses. So, before getting into the legal aspects of forex trading in India, we must have some basic knowledge about forex trading.
Forex trading refers to the foreign exchange or trading of foreign currencies in the global market. Forex trading aka currency trading is the largest and highly volatile market in the world.
The forex market is decentralized in nature as the exchange is done over the counter section, in short, refer as OTC. OTC is a market where the exchange of foreign currencies takes place directly between the parties without any supervision. Although it offers lucrative gain, it is dynamic and fluctuates continuously. Just like stocks, you can buy and sell currency based on what you think its value is or by simply strategizing where its value is added. However, you can hit big or.
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Forex trading in India is not legal as per the RBI and government guidelines. If you are a beginner who wants to trade in the forex market then we advise you to read its guidelines. Since the government prohibited us from forex trading, but there is one way we can invest in forex trading in India that invests via a foreign broker. There are plenty of online foreign brokers on the internet that helps you to invest in the forex hassle-free.
In case you lose money no one is responsible for it. So do at your own risk. The forex trading is similar to the trading of stocks; just like you purchase and sell a stock. It is synonymously referred to as currency trading in India. It is a marketplace for buying and selling foreign currencies of different countries. One currency is traded in exchange for the other currency. The two forex currencies involved form a currency pair which is represented by the three letters.
The trade will be of short selling as when the value reaches Rs. On vice versa, if the value exceeds, there will be a loss. The reverse happens in the case of buy trading. In this case, the investor takes advantage of the rise in the price of the dollar. Forex trading is not illegal in India.
Forex Trading in India
You can view the entire list of registered authorized dealers on the SEBI website. In simple words, an Indian citizen can do forex trading with currency pairs benchmarked against INR currency through listed forex trading portals. Forex refers to the foreign exchange market, which involves selling and buying practices of fiat currencies. It is one of the highly liquid and largest markets on a global scale. Many investors had created immense wealth by investing in the Forex; some of them burned their pockets.
It is a relatively new investment option that has gained huge attention from Indian investors. However, forex trading can be an appealing approach for experienced investors, but it is completely banned in India. Many Indian investors are investing in Forex via overseas brokers.
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They are doing it at their own risk. The forex market is very volatile. If you are thinking to invest in it, we advise you to deeply research it and select a highly trustable overseas broker who can help you in the best possible way. When you're looking to trade forex, it's important to identify brokers who are reliable and viable, and to avoid the ones that are not.
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In order to sort out the strong brokers from the weak and the reputable ones from those with shady dealings, we must go through a series of steps before depositing a large amount of capital with a broker. Trading is hard enough in itself, but when a broker implements practices that work against the trader, making a profit can be nearly impossible. When researching a potential forex broker , traders must learn to separate fact from fiction. For instance, faced with all sorts of forums posts, articles, and disgruntled comments about a broker, we could assume that all traders fail and never make a profit.
The traders that fail to make profits then post content online that blames the broker or some other outside influence for their own failed strategies. One common complaint from traders is that a broker was intentionally trying to cause a loss in the form of statements such as, "As soon as I placed the trade, the direction of the market reversed" or "The broker stop hunted my positions," and "I always had slippage on my orders, and never in my favor.
It is also entirely possible that new forex traders fail to trade with a tested strategy or trading plan. Instead, they make trades based on psychology e. When the rookie trader enters a position, they are often entering when their emotions are waning. Experienced traders are aware of these junior tendencies and step in, taking the trade the other way. This befuddles new traders and leaves them feeling that the market—or their brokers—are out to get them and take their individual profits. Most of the time, this is not the case. It is simply a failure by the trader to understand market dynamics.
On occasion, losses are the broker's fault. This can occur when a broker attempts to rack up trading commissions at the client's expense. There have been reports of brokers arbitrarily moving quoted rates to trigger stop orders when other brokers' rates have not moved to that price. Luckily for traders, this type of situation is an outlier and not likely to occur. One must remember that trading is usually not a zero-sum game , and brokers primarily make commissions with increased trading volumes. Overall, it is in the best interest of brokers to have long-term clients who trade regularly and thus, sustain capital or make a profit.
The slippage issue can often be attributed to behavioral economics. It is common practice for inexperienced traders to panic. They fear missing a move, so they hit their buy key, or they fear losing more and they hit the sell key. In volatile exchange rate environments, the broker cannot ensure an order will be executed at the desired price.
This results in sharp movements and slippage. The same is true for stop or limit orders. Some brokers guarantee stop and limit order fills, while others do not.
Even in more transparent markets, slippage happens, markets move, and we don't always get the price we want. Real problems can begin to develop when communication between a trader and a broker begins to break down. If a trader does not receive responses from their broker or the broker provides vague answers to a trader's questions, these are common red flags that a broker may not be looking out for the client's best interest. Issues of this nature should be resolved and explained to the trader, and the broker should also be helpful and display good customer relations.
One of the most detrimental issues that may arise between a broker and a trader is the trader's inability to withdraw money from an account. Protecting yourself from unscrupulous brokers in the first place is ideal. The following steps should help:. It should be pointed out that a broker's size cannot be used to determine the level of risk involved.
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While larger brokers grow by providing a certain standard of service, the financial crisis taught us that a big or popular firm isn't always safe. Brokers or planners who are paid commissions for buying and selling securities can sometimes succumb to the temptation to effect transactions simply for the purpose of generating a commission.
Those who do this excessively can be found guilty of churning —a term coined by the Securities and Exchange Commission SEC that denotes when a broker places trades for a purpose other than to benefit the client.
The SEC defines churning in the following manner:. The key to remember here is that the trades that are placed are not increasing your account value. Consequently, the Indonesian government has created ideal conditions in which local Forex companies thrived and can now even match international ones. Brokers are required to comply with the rules and laws issued by the bank. The Bank of Indonesia imposes strict standards, with high taxes and steep fines for those that break the broker regulations.
The Indonesian forex market was quick to comply with the requirements and it is slowly but surely maturing into a stable economy.