How to trade in the currency markets in India?

Posted By:
Subscribe to GoodReturns

How to trade in the currency markets in India?
While trading in equities in the cash and the derivatives segment is popular in India, trading in the currency derivatives market is not so.

It still has to go a long way before it catches up with the equity markets in the country. But, trading in the currency markets can also offer you opportunities just as the equity markets.

How it works?

You first need to open a currency trading account with a broker, just like you do in the equity markets. Most of the brokers that have membership of the NSE or BSE, also offer you the opportunity to open a currency trading account.

Once the currency trading account is opened you can start trading. You can buy and sell the US Dollar, Great Britain Pound, Euro or the Japanese Yen.

While the the derivatives segment in the equity market offers a three month derivative contract, the period of the contract in the currency segment is 12 months. What this means is that if you buy one lot of a dollar contract, you can settle the same after 12 months. So, if you buy a Dollar contract of April 2014, you can settle the same by March 2015.

Each contract has a minimum lot size of 1. Each lot has 1000 units.

A simple calculation?

You can buy 1 lot of 1000 units and the margin requirement is Rs 3000. So, if you have around Rs 3000 you can buy 1000 units. Say, you buy 1000 units of the dollar at Rs 60 on April 21 and settle the same at 60.10 on April 28, you make a profit of Rs 100. If you buy 10,000 units and sell the same at 60.10 you make a profit of Rs 1000 and so on.

Similarly, if you buy the 1000 units of the dollar at 60.00 and sell the same at 59.90, you make a loss of Rs 100.

Trading in the currency markets takes place from Monday to Friday between 9 am and 5 pm.

GoodReturns.in

Story first published: Monday, April 21, 2014, 9:16 [IST]
Please Wait while comments are loading...
Company Search
Enter the first few characters of the company's name or the NSE symbol or BSE code and click 'Go'

Thousands of Goodreturn readers receive our evening newsletter.
Have you subscribed?