ON this article, we’ll be learning about the trading operations in indian currency market.For the beginners, I’ll try to keep things simple here & will not complicate this article with detailed core informations regarding currency market here. I’ll be sharing informations only at a level which is required for you to start trading currency market & once you spend some times trading in this market real-time,you’ll come to know the detailed features automatically over time & situations.
Firstly, I strongly recommend you to learn about indian stock market trading first before you try your hands on currency market as it helps you to understand better currency market operations.So, if you’ve missed my article on indian stock market trading operations.then pls click to read it here.
To understand currency market key functions, we need to understand the concept of cash market or equity market,future market,lot size,expiry cycle,exchanges,trading a/c,broker,commissions etc terms and if you’ve understood article written on indian share market,you must have understood all these concepts hence I’m not going for another detailed explanations of all these terms as I already did that in stock market article.
As the name suggests, In currency market, we trade only currencies – simple !!!!!!!!!
Today’s US DOLLAR rate is Rs 62/ per dollar means to buy 1 us dollar,you’ll have to pay Rs 62/.
In your analysis,if US DOLLAR rate will move upto Rs 65/ per dollar after 1 month, then you can buy US DOLLARS today & hold it for a month.Once you see the rate has reached at Rs 65/ as you expected,now you can sell those dollars & earn the profits. So the same way, we can make money using currency movement up & down like how we learnt making money using stocks & commodities price movement!!!!!!!!!
Like USDOLLAR example, in indian currency market, we can bet for 3 more different currencies & they are :
GBP ( great Britain pound ) , EURO , JPY ( Japanese yen ).
SO, We have four currencies to trade in india against INDIAN RUPEES & they are shown on your trading screen like this :
So it looks like some currency “pairs” , isn’t it ? Yes>> in currency market, we trade currency in “pairs” like USDINR or GBPINR etc.
Lets have a look how it really looks like on the trading screen in this video:
Some key points below :
1) At present, currency futures are traded on platforms offered by exchanges like the NSE, Bombay Stock Exchange (BSE), MCX-SX, and United Stock Exchange (USE).
2) Currency trading hour is 9.00 am to 5.00 pm.
3) There is no cash or equity form like we use in indian stock market, for trading this currency market.So you need to open a trading account only with a broker & no need to open a demat account.
4) we can only trade future & option segments in currency market. So as you know, in future trading, there are special features like:
a) LOT SIZE : There are fixed lot sizes defined by exchange.You’ll have to trade in minimum 1000 qty in respective currency pairs & this min qty requirement is also called lot size means,here 1 lot = 1000qty .So, if USDINR price is rs 63/ now, you’ll have to trade in minimum 1 lot (which is 1000usd) hence you’ll be buying minimum 1000usd or multiple of that to bet on this currency pair movement.Same condition is applicable for other currency pairs to trade.
b) MARGIN FACILITY : We’ll be trading on margin hence no need to pay the full amount for what we trade.When you buy 1 lot(1000qty) of usdinr future contract at rs 63/, you’re buying amount is Rs 63,000/. As we are trading future, so we get a margin facility of paying 3% of total investment & enjoy the gains on total buying amount.So to buy 1 lot of usdinr , we just need to pay rs 1900/ instead of paying rs 63,000/.
c) EXPIRY DEADLINE : There will be expiry deadlines in all the future contracts & all the contracts will expire on last working day of respective month’s contract.
d) LONG / SHORT : We can long / short the currencies & hold the positions in both way till expiry.
e) Regarding option trading, once you are master enough trading stock market options, you’re ready enough to trade currency options too as option trading in all the segments are same.As i’ve covered option trading in depth in stock market operation tutorial hence i’m not repeating the same here.
I’ve added a quick video below to show you how future trading takes place realtime :
As a starter, you should open a trading account first with the help of a broker.Choose you broker carefully as if he misguides you,you can face lot of problems in your initial days.So choose a good branded broker rather than going for some random brokers.I’ll suggest you to open your accounts under a broker’s branch office & not under a franchisee shop of that broker.If you can open your account in the broker’s main branch office ,nothing better than that as you’ll get the best service from there.
What we discussed above, are the basic understandings of indian currency market trading & Once you’re tuned up with the basic ideas we discussed here,i’ll suggest you to read the article regarding TECHNICAL ANALYSIS. As you’ll have to learn technical analysis next, to know which currency to trade & where to buy/sell.