Most Common Forex Pairs In India

As a Forex trader, knowing which currency pairs to focus on can make a big difference. This holds especially true for traders in India, where the Indian Rupee (INR) plays a key role. Most Indian traders commonly trade pairs like EUR/INR, GBP/INR, USD/INR, and JPY/INR due to their high trading volumes and frequent price movements. These pairs are popular because the INR is either the base or quote currency, making transactions more straightforward. Apart from INR-based pairs, currency pairs such as GBP/USD, EUR/USD, and USD/JPY are also actively traded by Indian traders, offering more global exposure. In this article, we will discuss the best pairs to trade in India, considering the specific situation of Indian traders.

What are the best Forex pairs to trade in Indian local time?

India offers a vibrant Forex market, with traders focusing on both domestic and international currency pairs. The best Forex pairs to trade during Indian local time (IST) are USD/INR, EUR/USD, GBP/USD, USD/JPY, and AUD/USD, particularly between 17:30 IST and 20:30 IST. This time coincides with the overlap of European and US trading sessions, providing high liquidity, tighter spreads, and increased market activity.

Here’s a closer look at some of the best currency pairs for Indian traders:

USD/INR

This is the most widely traded currency pair in India, reflecting the value of the Indian Rupee against the US Dollar. Indian traders prefer USD/INR for its high liquidity, stable market behavior, and relevance to the local economy. USD/INR is a key choice for Indian traders as it involves the domestic currency, ensuring accessibility and relevance. Its liquidity and activity during Indian trading hours make it ideal for frequent price movements and trading opportunities.

EUR/USD

As the most traded currency pair globally, EUR/USD attracts Indian traders due to its tight spreads and high liquidity. The pair is influenced by major economic events in the Eurozone and the US, making it a great choice for traders who keep up with global news.

GBP/USD

Known for its volatility and significant price swings, GBP/USD is favored by Indian traders who enjoy active trading and quick profit opportunities. Its price movements are influenced by economic data from the UK and the US, as well as geopolitical developments. For global pairs, EUR/USD and GBP/USD stand out due to their high liquidity and significant volatility during the London and New York session overlap.

USD/JPY

This pair is popular among Indian traders for its stability and liquidity. The Japanese Yen often serves as a safe-haven currency, making USD/JPY a good choice during times of market uncertainty. Traders can benefit from steady trends and minimal unpredictability. USD/JPY offers consistent trends and low spreads, making it a reliable option.

AUD/USD

The Australian Dollar and US Dollar pair is favored for its exposure to global commodity markets. Indian traders focusing on international trade and market diversification often choose AUD/USD due to its connection to gold, oil, and other commodities. AUD/USD, while primarily active during Asian hours, still presents notable opportunities as the European and US sessions influence its movement.

Given the regulatory scenario in India which restricts trading of certain pairs, traders might be required to use an international broker to gain access to them. We have covered such brokers in the table below:

Can I trade Forex 24/5 in India?

Yes, Forex trading is accessible 24/5 in India across different global market sessions:

• Asian session. 5:00 AM to 2:30 PM IST.

• European session. 12:30 PM to 10:00 PM IST.

• US session. 8:00 PM to 5:00 AM IST (next day).

Rules and regulation

Licensing in India

In India, brokers are regulated by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI). The former supervises foreign currency and the latter controls the stock market.

The conditions for obtaining a license are: sufficient capital, a detailed business plan, compliance with rules and regulations, professional qualifications of key employees, and a professional reputation of the applicant.

Investor protection in India

To resolve disputes, traders can approach the RBI and SEBI which prevent fraud and dishonest activity in the securities market.

Taxation in India

In India, how your trading income is taxed depends on whether it's speculative trading income or investment income. Speculative trading income (such as intraday or futures trading) is taxed as business income, while investment income from stocks held for over a year qualifies for long-term capital gains (LTCG) and is taxed at a lower rate of 10%. Properly classify your trades to avoid unnecessary taxes.

• How F&O income is treated. If you trade in F&O, it is considered business income, even if you hold positions long-term. This means F&O income is taxed at a 30% rate for the highest tax bracket, like speculative income. However, a major advantage is that F&O losses can be set off against other business income, offering flexibility in managing your overall tax liability.

• Maximize your tax savings. India’s taxation rules allow you to set off losses against other income. Short-term capital losses from equity trading can be set off against short-term capital gains, while business losses from intraday trading or F&O can be set off against any business income. Keep in mind that capital losses can only be carried forward for 8 years, but business losses can be carried forward for up to 8 consecutive years.

• Tax-free dividend benefits. If you receive dividend income from stocks, remember that dividends below ₹10 lakh are tax-free. For dividends exceeding ₹10 lakh, tax is applied at 10%. This makes dividend income an attractive source of tax-free income, especially for small investors who hold stocks for the long term.

• Plan your deductions well. Regular traders can claim deductions on trading-related expenses, including brokerage fees, internet charges, and platform costs, if their income is classified as business income. These deductions can significantly reduce your taxable income, making business income more tax-efficient than capital gains for active traders.

How to start currency trading in India

Starting to trade in Forex markets in India involves a few important steps. Here is a guideline on how to get started:

1. Open a currency trading account. Choose a reputable Forex trading broker and open a currency trading account. In India, Forex trading necessitates having a trading account. Many brokers provide a combined trading and Demat account.

2. Submit KYC documents. You must submit KYC documents, including proof of identity, address, income, and bank account details. After verification, you'll be notified whether your application is approved or rejected.

3. Choose a currency pair. Trading in Forex is conducted in pairs. Beginners typically start with major currency pairs. However, those with adequate funds can trade in any currency pair.

4. Read the quote. Comprehend the bid and ask prices of a currency pair. The bid price is the buying price, and the asking price is the selling price. Understanding these rates is fundamental to successful trades.

5. Pick a position. Study market trends and select a position. For example, if the INR appears to be strengthening against the USD, buying might be a good idea.

Currency pair trading strategies for Indian Forex traders

Indian traders can boost their chances of success by using strategies that fit different market situations and personal preferences. Here are some popular approaches for trading currency pairs:

1. Trend following. Many Indian traders watch for upward or downward price trends and ride the momentum to make profits. Currency pairs like USD/INR and EUR/INR often show strong trends during big economic updates.

2. Range trading. This approach focuses on trading between set high and low price levels. For example, GBP/INR can be predictable during quieter periods, making it ideal for range-based trades.

3. Breakout trading. This strategy targets sharp price movements when the market breaks out of its usual pattern. News-driven events, such as an RBI rate change, often create profitable breakout opportunities.

4. Carry trade. Experienced traders may borrow funds in currencies with low interest rates and invest in those with higher returns. This strategy works well when there’s a clear interest rate gap.

5. Fundamental analysis. Traders look at key economic data, like inflation rates, RBI policies, and global trends, to understand how they might affect the rupee’s performance.

6. Technical analysis. Historical price data, patterns, and tools like moving averages and RSI indicators help traders predict future price moves and plan their trades more effectively.

7. Scalping. This strategy is for those who prefer short, quick trades to make small but frequent gains. Scalping works well during busy trading sessions when price movements are fast.

Strategies for success with USD/INR, EUR/INR, GBP/INR, and AUD/INR

Anastasiia Chabaniuk Author, Financial Expert at Traders Union

When choosing the top currency pairs to trade in India, it’s essential to look at the trade connections between India and other countries. USD/INR is naturally the most popular pair due to its prone-to-price fluctuations nature, making it ideal for traders who can handle volatility. As the Indian Rupee (INR) reacts strongly to global events like oil price changes, U.S. Federal Reserve policies, and international trade deals, staying updated on these factors is crucial for making profitable trades. Don’t forget about pairs like EUR/INR and GBP/INR, which can be equally profitable, especially when there’s shifting political or economic landscapes in the Eurozone or UK.

Another pair to keep an eye on is AUD/INR. The Australian Dollar (AUD), linked to commodity prices, is sensitive to global commodity market trends. AUD/INR tends to have more stable movement, offering safer entry points for traders looking for a less volatile currency pair. Major global economic reports and Reserve Bank of Australia’s interest rate decisions often cause shifts in this pair, creating opportunities for well-informed traders. By combining USD/INR with pairs like EUR/INR, GBP/INR, and AUD/INR, you can develop a strategy that minimizes risks and provides consistent profits in a variety of market conditions.

Conclusion

To wrap up, the top currency pairs to trade in India depend on how well you understand both your trading style and the global events that impact currency movements. While USD/INR continues to be the most traded pair, EUR/INR, GBP/INR, and AUD/INR also offer valuable chances due to India's economic ties and global market trends. It’s essential to keep an eye on the key economic drivers like commodity price fluctuations and interest rate decisions to fine-tune your strategy. Spreading your investments across multiple pairs reduces risk and enhances your chances of consistent growth.

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