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Questions (FAQs) on
What is Currency Derivatives Trading ?
Currency Derivatives are the derivative contracts based on foreign currencies and these derivatives contracts are traded on exchanges. The way stocks are underlying and stock futures or stock options contracts can be traded similarly currencies ( US Dollar, British Sterling Pound, Euro & Japanese Yen) become the underlying and their derivative contracts get traded.
Which exchanges offer Currency trading in India ?
National Stock Exchange (NSE) was the first to start currency derivatives trading in 2008 and then BSE and MCX-SX also joined in later. Initially only currency futures were traded but later on options contracts were introduced and now you can trade in Currency Futures & Options both.
Which Currencies can I trade in India ?
In India, there are only 4 currency pairs which have derivative contracts and can be traded at exchange platforms. These 4 currency pairs are :
USD-INR (US Dollar- Indian National Rupee)
GBP-INR (Great Britain Pound – Indian National Rupee)
JPY-INR (Japanese Yen- Indian National Rupee)
EUR-INR (Euro – Indian National Rupee)
Besides there 4 currency pairs, there are 3 cross-currency pairs as well.
EUR-USD (Euro- US Dollars)
GBP-USD (Great Britain Pound – US Dollars)
USD-JPY (US Dollars – Japanese yen)
Important things to keep note while trading in Currency Derivatives
There are only 4 Currency Derivatives contracts to trade.
Currency Derivatives have both futures and options contracts.
Trading in futures require you to pay margins whereas buying options needs you to pay premium.
There are monthly expiry of the contracts and at any point of time there can be 12 months contracts for a currency pair at the max.
In case of currency trading, the expiry day or the final settlement day is the last working day of the month.
Similar to stocks futures and commodities futures, MTM (Mark to Market) concept is applicable to currency trading as well.
Currency trading timings at exchanges are 9:00 am to 5:00 pm, from Monday to Friday whereas cross currency pairs are traded till 7:30 pm.
How can I Trade in Currency Derivatives ?
You need to open a currency trading account with a currency broker. The broker may give you an online trading or mobile based trading platform thru which you can trade in your choice of Currency Pairs. When you find a currency broker for yourself, you must compare their brokerage, charges, taxes, services, trading platform etc. Your currency broker or the financial advisor for currency trading will also help you learn the basics of currency trading.