Wednesday, August 4, 2010

Trading In Forex

Forex offers a 24 hour platform for trading. Since the Forex market is large, worldwide, it is not subject to manipulation. Currency pairs trend fairly well, therefore forex remains an area where trend trading makes money.

For Indian traders, entering the forex market has its difficulties. Here are some ways to participate in this market:

1. The MCX and NSE, both offer futures contracts in Rupee against US Dollar, British pound, Euro and Yen. There are questions of liquidity, but this is an easy to use vehicle since traders probbaly have access to MCX and NSE. Apart from liquidity, there is the problem of limited choice of currency pairs, only 4 and all against the Rupee.

2. Opening an account with a foreign bank / currency trading house. The forex market does not have a forex exchange. large banks and ealers offer trading opportunities by giving buy and sell quotes that enables a trader to buy and then sell to the trading house. Opening an account with the foreign currency house requires remittance of foreign currency. I am not sure if RBI regulations permit payments for speculative transactions. 

3. Trading with a Bank which has branches in India. Most corproates trade in Forex through some bank or the other having branches in India, but I do not think that indiidual traders are allowed access to these trading systems.

4. Trading with a representative of a foreign trading house by payment in Rupees. I have ben told that some people take payment in rupee and open an account for the trader with a foreign currency trading house. I think this has some legal difficulties, and, it is best to stay away.

My point is: trading in forex requires platforms that may not be accessible by Indian traders. If readers have more knowledge, please share will all of us


Ashvin said...


what about alpari india. branch of alpari uk. they allow to trade in all currency pair. and transactions are done in rupees.


Nifty Tips said...

Nice Blog.. Keep it Up!!!!

gourv said...

Hello Sir,
I have traded in FOREX.I have my account in comapany has branches in many country including India.In India there office is @Mumbai.Money can be transferred through online banking,debit or credit cards.They have their support staff who works from 9am to 10PM.Buy and sell also can be done by calling them, the way we do with stock brockers in india equity.

Please check if all these are OK.Or still there is some thing ilegal in it.


Devv said...

Dear sir,
I have a question for you that the s&p 500 has crossed over the 1016 mark, the right shoulder of the h&s pattern, does this confirm the failure of the h&s pattern, more so since it has also broken above its 200 and 127 dma's...i would like to know if this is a confirmed failure of the h&s pattern what is the usual expected move after such a failure?? It would be great if you could kindly answer this question of mine.....

Pi said...

Okay.. the good news is that there is perfectly legal way to get access to international pairs sitting right here in india itself !!!

We have four contracts traded on NSE, those are the USD/INR, EUR/INR, GBP/INR and INR/Yen. Now if one buys the EUR/INR pair and sells the USD/INR pair one has actually formed a long position in EUR/USD. This is called a synthetic position. Thus you know have an exposure to the EUR/USD, which is completely legal and all your profits/losses are in INR itself :)

No complications, no jhamela. Similarly you can make all the other major pairs - GBP/USD, USD/Yen, EUR/Yen, GBP/Yen, EUR/GBP, a total of 6 pairs.

Infact my firm does arbitrage by making synthetic positions in these pairs and taking opposite position in CME futures.

Only problem is that contracts of GBP/INR, Yen/INR are not very liquid, but its okay if you are taking a positional trade and not trying to trade actively. With time those contracts too should get liquid.

Btw, you should check out Nifty on CME again. Contract has started doing 2000-2500 lots daily. Though it mostly trades only during our market hours, after which its mostly quite dead..