What this means is that you are betting on the currency on a future date. In other words, you are ready to sell the currency within a specified date at a specified price.

It's important to note that currency markets are volatile and your future bet would have to include a solid understanding of the economic fundamentals, based on how the currency would move

For example, if you expect the current account deficit to be high in the next few months, you could be sure that the rupee would fall. Therefore, your future bet should be on a falling rupee.

Where are they traded and how to open an account?

The currency futures are traded on the National Stock Exchange and you can open an account with one of the brokerage firms that are members of the NSE Currency Derivatives market. For example, you can open an account with Geojit BNP Paribas or RK Global to trade in the currency market.

You have to submit your know your customer client details, wherein you would provide all the necessary identity and address proof details.

Once you have opened a forex trading account, you can transfer funds online through net banking. To trade in the currency market you need to provide a margin and most forex brokers charge a margin of 5 per cent. This can be altered at the discretion of the broker.

Say for example if a client buys a near month contract at Rs 48 (i.e. value of the contract), then the value of the contract is 48x1000= Rs 48,000. He needs to pay upfront a margin of 5 per cent, which amounts to 5 per cent of Rs 48,000 = Rs 2400.

It's essential to remember that you should have at least a basic idea of how the currency markets work, before endeavouring to trade.

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