The Federal Democratic Republic of Nepal is a small South Asian country nestled between eastern China and northern India. Although relatively small in size, Nepal is the 43rd most populous country in the world and home to some of the world’s most memorable sites, including Mount Everest. In fact, thanks to the massive Himalayan mountain range, Nepal is home to 13 of the 20 tallest mountains in the world.
But while Nepal may have some of the most majestic landscapes on the planet, it doesn’t have much of a financial footprint. Nepal is a nation that has had long battles between competing government factions and was ruled as a monarchy as recently as 2008. But democracy has grown in Nepal and the Constitution of Nepal was instituted in 2015, making the country a republic and opening the avenues of commerce.
Forex trading is permitted in Nepal and all trading of currencies (and other asset classes) is regulated by the Securities Board of Nepal, or SEBON. The Nepalese rupee is directly linked to the Indian rupee. India and Nepal have an exchange rate pegged to their currencies, which has been in place since 1993. One Indian rupee is worth 1.6 Nepalese rupees under this exchange rate policy.
6 Steps to Getting Started with Forex in Nepal
Follow these steps to start trading forex in Nepal.
1. Connect to the Internet
Online forex brokers have not only made currency trading affordable and accessible to almost everyone, but they also make it possible to trade from anywhere you have an internet connection. Advanced forex trading no longer requires super-fast connection speeds or expensive computer technology. If you have a laptop or smartphone, you can start trading forex.
2. Find a Forex broker that accepts clients in Nepal
According to SEBON, it is legal to trade forex in Nepal, so citizens will have a variety of forex brokers to choose from. Select a broker that suits your needs – consider your trading style, the number of trades you will make each month, the currency pairs you wish to trade and the leverage you wish to access.
3. Open your account
Before opening an account, you will need to send the broker some personal information and choose the type of account you want to trade. Forex trading requires high leverage as exchange rate movements are measured in fractions of 1 pip and many brokers offer different options on spreads and market access.
4. Fund your account
Funding your account while based in Nepal might be the hardest part of the deal, as brokers accepting Nepalese rupees are rare. Fortunately, many brokers accept Indian rupees or digital currencies like Bitcoin that are not tied to a sovereign nation. Some brokers will have minimums for new accounts – make sure you have enough to meet this requirement if you are exchanging Nepalese rupees for Indian rupees.
5. Choose a Forex trading platform
Forex traders often have the choice between the broker’s proprietary trading platform or a third-party powerhouse like MetaTrader or NinjaTrader. One of the best features of third-party platforms is the advanced features that traders can deploy. With MetaTrader and NinjaTrader, you can program automated trading systems to trade the forex markets while you sleep or shop.
6. Execute your first trade
Once your account is activated and funded, you can start trading. Most brokers offer a demo account, and it would be wise to take advantage of this if you are new to currency trading. Although many of the same trading strategies from other asset classes apply to forex, it’s always a good idea to practice first.
Nepal Forex Trading Strategies
Many of the same trading strategies used for stocks can be used for currencies, but it’s important to understand the differences between asset classes. Currencies can be volatile, such as when the pound fell against other major currencies after England voted to leave the European Union. But for the most part, currency movements won’t be as sharp and you’ll need an experienced eye to catch trends. Here are some forex trading strategies to familiarize yourself with:
- Trend tracking
- Dynamic trade
- range trade
Example of Forex trading in Nepal
Let’s say you look at how different countries have handled the coronavirus pandemic and noticed how much better Japan has done to contain the outbreak compared to Britain. You believe that different economic forces in Britain will drive the value of the pound down while the Japanese yen rises.
In this specific trade, you would want to buy Yen and GBP short. So you need to find the GBP/JPY currency pair with your forex broker and sell it short. When you short the GBP/JPY, you are predicting a rise in the value of the JPY against the GBP. If you thought the pound would rise and the yen would fall, you would buy the GBP/JPY currency pair.
Make money with Forex in Nepal
Forex trading can bring great rewards, but leverage also comes with a lot of risk. Many forex brokers allow leverage of up to 500:1, which means one dollar can control a position worth 500 times more. Currency moves may not seem as drastic compared to stocks, but it’s still easy to go broke when applying so much leverage.
When trading forex, always have a plan and use a strategy that you are comfortable with when real money is involved. If you are not yet comfortable, use your demo account to practice until you find a method that works for you. The forex market is open from 5:00 p.m. Sunday EST to 5:00 p.m. Friday EST – they’re not going anywhere while you catch up.
Best Online Forex Brokers in Nepal
Finding a suitable forex broker for use in Nepal requires some research. Here is a list of our favorite online forex brokers available to Nepalese citizens.
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CedarFX is not regulated by any major financial agency. The brokerage is owned by Cedar LLC and is based in St. Vincent and the Grenadines.
AUD$200 or equivalent
Forex traders have their own unique terminology. Make sure you understand the following list of terms before embarking on a forex trading career.
Seed: Acronym for percentage point. It is the smallest measured unit of movement in the exchange rate of a currency pair.
Lot size: Similar to stock trading, lot size refers to the standardized trading amount. In forex, 1 lot is usually equal to 100,000 base currency units.
Orders: An order is simply the instructions you give your broker when executing a trade. For example, a buy market order means buying a currency pair at any exchange rate, while a limit order means buying only when a certain exchange rate is reached.
Calls: In options trading, a call is purchased when the buyer wants the option (but not the obligation) to buy a certain currency pair at a certain exchange rate on a certain date. Using options in forex trading can increase risk due to the amount of leverage you add to an already leveraged trade.
Nepal’s Growing Economy Could Bring More Forex Trading Activity
Nepal only recently became a full democracy, but its private sector is growing as more and more Nepalese citizens are lifted out of poverty. When a population realizes economic gains, its net salary increases and part of this salary inevitably ends up in the capital markets. And since forex trading is already regulated by SEBON, residents can trade with peace of mind knowing that brokers and dealers must follow the law.
Frequently Asked Questions
questions and answers
Is forex taxed in Nepal?
In Nepal, foreign exchange gains are taxed as a capital gains tax. Capital gains tax in Nepal is 5% unless held for less than one year, which is 7.5%.