Currency Future for retail investors In INDIA

Currency future is recently been introduced in India by NSE and then by MCX for retail or general investors except foreign investors. Earlier Banks and institutional investors and exporters and importers used this as tool for future uncertainly in the form of currency fluctuation. One currency can be hedged against the other to reduce risk. Hedging is also opened for retail investors in India Recently.
Exchange rate is always a matter of concern for people who remit money to home, and it’s a vital matter of concern for those businessmen who export and import goods and trade in major currencies. To reduce the forex risk exchanges have come up with exchange controlled currency trade which helps investors to reduce currency risk and hedge their position.
 Who can trade in currency?
Any retail investor who is trading account with a broker can trade in currency future. Now before trading one should know the tricks of the trade.Unlike stock future currency future is highly volatile and hence subject to risk. One should be extremely careful while trading in currency future especially the retail investors.
The central aim of currency future is to protect the investors and companies from the adverse movement of currency movements. In foreign exchange market the base currency is the first currency while the second currency which pairs with the base currency is called the term currency. To simplify lets give an example of Dollar-rupee pair or Euro-rupee pair where the dollar or the euro is being quoted in terms of the term currency that is rupee. When the base currency buys more of the term currency base currency appreciates and the term currency depreciates.
Currency trading can be done both in future and cash but cash segment is not open for retail investors except the big exporters or importers and the financial institutions while the future trading is open for all. Like equity or commodity trading currency trading has a contract size, expiry period, lot size, tick size. Each lot size costs 1000 dollar for currency trading while the tick size is the minimum price differential at which a bid is executed.
 By Dipti Prasad Padhi

By : | Category : Business and Economy| Date : November 11,2011

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