Currency Futures Trading (India) as a Forex Trading Alternative

As I mentioned in a recent post, Online Forex Trading is an illegal means of making money in India. So what alternatives do Indian citizens have if they still want to trade currency? Trading Currency Futures is the answer! In this post, let us understand how to trade forex futures in India.

Futures, as you probably know, is more like a contract that says that you as a buyer will purchase the underlying item (contracted item) at a specific price (contracted price) at a specific time (Expiry date) in the future. Now let us move on to currency futures in the Indian context.

Currency Futures in India

Unlike online forex trading, all Indian nationals are legally eligible to trade currency futures in India via participatory agencies or brokerage firms (e.g. ICICI Securities, Geojit BNP Paribas etc) These agencies offer online trading of currency futures either in National Stock Exchange (NSE) or Multiple Commodity Exchange (MCX). For example, I use the ICICIDirect.com brokerage account that’s a participant of NSE.

currency future trading

Once you open an online trading account with them, you can trade popular currency pairs (like in the case of online Forex trading) as futures. However, at the moment, only four major currencies are traded as futures in India and they are USD, EUR, GBP and JPY. Needless to say the other currency in the pair has to be the Indian Rupee (INR) and hence the four futures are USDINR, EURINR, GBPINR and JPYINR respectively. In other words, here you are playing with the exchange rates of major currencies against Indian rupee.

Since the volatility in forex market is very high and the volume transacted per day is really very huge, the currency futures have the potential to make money during Intraday (day trading) or during a futures contract period (a month).

How to Trade Currency Futures in India?

In order to trade futures, you need to understand the a few terms related to the futures.

  • Typically, futures have an expiry time of roughly a month. All futures expire usually on the last trading day of the month
  • If you see something like ‘FUT-USDINR-27-Mar-2013’ in your trading account or a financial portal, you don’t need to get scared. It just means that we are talking about a USDINR future that has an expiry date of 27th March 2013
  • The future currency pairs are usually traded in lots of 1000 which means that one lot (minimum unit of contract) is 1000 USDs in the case of USDINR futures. This means, a minimum value of 55000 rupees per contract at current exchange rate. But wait…you don’t need Rs.55000 to do a future trading. Read on
  • Future trading works on margin leveraging which means that although you are entering a contract to buy a lot (or 1000USDs) particular future, in order to get started, you just need something like 4% of the future value (which is about 2200 rupees). Going by this example, if you want to buy 4 lots or 4000 USDINR in futures, you just need to have around 8800 rupees
  • Once you enter a contract via buying a future, it can be terminated anytime within the future expiry date when you think you have made a profit (or stop loss). If you don’t sell the futures within the expiry date, anyhow it will expire on the last trading day (or future expiry date)
  • By the way, you don’t need to necessarily buy the current month’s futures but can opt for April futures or May futures etc
  • A price movement of 10 paise in the exchange rate (i.e. Future’s current rate) makes you 100 rupees profit (or loss) and now you probably understand the potential as well as risks in future trading

If you want to know more about trading forex futures in India, please read the FAQs on ICICI site. By the way, in order to make good money via trading in currency futures require you learn a little bit of technical analysis. There are a number of portals out there that gives technical trends online for free and you may watch them carefully for a few days or weeks before investing.

Disclaimer: This is not a paid or promo post and I have myself just started currency futures trading. I am not really an expert in future trading but I see a huge online money making opportunity using this method. Please use your own judgment and/or seek expert advice before investing your money in currency futures.

Comments

  1. Khushboo :

    To trade in Currency Futures in India, you can read the Book “Foreign Exchange & Forex Trading” by Ankit Gala & Jitendra Gala. The Book is published by Buzzingstock Publishing House and is available in English, Gujarati & Marathi.

  2. I would like to say, for investors searching to expand their portfolios, currency futures are a outstanding place to initiate. Currencies are the preeminent trending marketplaces to deal, and therefore it is comparatively unproblematic to build trading policies around these markets.

  3. Shashank :

    Can u please tell me where can I get real time streaming charts for USD/INR pair(NSE,MCXSX,BSE)?

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