Foreign Exchange Derivatives India
foreign exchange derivatives india
Learn Foreign Exchange Trading – Learn About Basics of Foreign Exchange Trading
Learn Foreign Exchange Trading
What is Forex Trading?
Foreign Exchange/Currency Trading is trading in currencies of various countries in order to make profits. Currencies are always traded in pairs meaning you can trade in two currencies at a time. You buy one currency and sell another currency. The most traded currency pairs are USD/JPY, GBP/USD AND EURO/USD. The first currency of the pair is called as the base currency. Buying GBP/USD means you are buying GBP and selling USD. Similarly selling EURO/USD means you are selling EURO and buying USD.
How to trade in currency/foreign exchange
Big money can be made through trading in forex. The reason being the margin money requirement (minimum deposit) is only 5% of the total trade. For example – If you have Rs 1000 in your account, you can take positions on Rs 20,000 (1000*100/5). This means a person can take a very large position in the market with a small amount. Let’s understand this concept by an example – If one wants to trade in pound and have a capital of Rs 75000. Learn Foreign Exchange Trading
If 1 pound = Rs 75
Lot size is 1000
Total exposure = 75000*100/5 = Rs 14, 80,000
Case 1 – If the rupee depreciates by Rs 1, 1 Pound = Rs 76
Trader incur a loss of Rs 1000*10 = Rs 10,000
Case 1 – If the rupee appreciates by Rs 1, 1 Pound = Rs 74
Trader incur a profit of Rs 1000*10 = Rs 10,000
With rise or fall in currency one can either make money or lose money. Traders should always note there is huge potential of money to be made and the risk is quite high as well. Investment in currency futures is based on the risk appetite. Ideally a small investor should not have exposure to this form of instruments.
Forex Trading in India
At present, derivative products (futures & options) are available only in four major currencies – Dollar, Euro, Pound and Yen. These are offered by National Stock Exchange and Multi- Commodity Stock exchange. Learn Foreign Exchange Trading
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