INDIAN-CURRENCY-MARKET trading operations explained.
ON this article, we’ll be learning about the trading operations in indian currency market. For the beginners, I’ll try to keep things simple here & will not complicate this article with detailed core informations regarding currency market here. I’ll be sharing informations only at a level which is required for you to start trading currency market & once you spend some times trading in this market real-time, you’ll come to know the detailed features automatically over time & situations.
Firstly, I strongly recommend you to learn about indian stock market trading first before you try your hands on currency market as it helps you to understand better currency market operations. So, if you’ve missed my article on indian stock market trading operations. then pls click to read it here.
To understand currency market key functions, we need to understand the concept of cash market or equity market, future market, lot size, expiry cycle, exchanges, trading a/c, broker, commissions etc terms and if you’ve understood article written on indian share market, you must have understood all these concepts hence I’m not going for another detailed explanations of all these terms as I already did that in stock market article.
As the name suggests, In currency market, we trade only currencies – simple .
Today’s US DOLLAR rate is Rs 62/ per dollar means to buy 1 us dollar, you’ll have to pay Rs 62/.
In your analysis, if US DOLLAR rate will move upto Rs 65/ per dollar after 1 month, then you can buy US DOLLARS today & hold it for a month. Once you see the rate has reached at Rs 65/ as you expected, now you can sell those dollars & earn the profits. So the same way, we can make money using currency movement up & down like how we learnt making money using stocks & commodities price movement.
Like USDOLLAR example, in indian currency market, we can bet for 3 more different currencies & they are :
GBP ( great Britain pound ) , EURO , JPY ( Japanese yen ).
SO, We have four currencies to trade in india against INDIAN RUPEES & they are shown on your trading screen like this :
So it looks like some currency “pairs” , isn’t it ? Yes>> in currency market, we trade currency in “pairs ” like USDINR or GBPINR etc.
Lets have a look how it really looks like on the trading screen in this video:
1) At present, currency futures are traded on platforms offered by exchanges like the NSE, Bombay Stock Exchange (BSE), MCX-SX, and United Stock Exchange (USE).
2) Currency trading hour is 9.00 am to 5.00 pm.
3) There is no cash or equity form like we use in indian stock market, for trading this currency market. So you need to open a trading account only with a broker & no need to open a demat account.
4) we can only trade future & option segments in currency market. So as you know, in future trading, there are special features like:
a) LOT SIZE : There are fixed lot sizes defined by exchange. You’ll have to trade in minimum 1000 qty in respective currency pairs & this min qty requirement is also called lot size means, here 1 lot = 1000qty. So, if USDINR price is rs 63/ now, you’ll have to trade in minimum 1 lot (which is 1000usd) hence you’ll be buying minimum 1000usd or multiple of that to bet on this currency pair movement. Same condition is applicable for other currency pairs to trade.
b) MARGIN FACILITY : W e’ll be trading on margin hence no need to pay the full amount for what we trade. When you buy 1 lot(1000qty) of usdinr future contract at rs 63/, you’re buying amount is Rs 63,000/. As we are trading future, so we get a margin facility of paying 3% of total investment & enjoy the gains on total buying amount. So to buy 1 lot of usdinr , we just need to pay rs 1900/ instead of paying rs 63,000/.
c) EXPIRY DEADLINE : There will be expiry deadlines in all the future contracts & all the contracts will expire on last working day of respective month’s contract.
d) LONG / SHORT : We can long / short the currencies & hold the positions in both way till expiry.
e) Regarding option trading, once you are master enough trading stock market options, you’re ready enough to trade currency options too as option trading in all the segments are same. As i’ve covered option trading in depth in stock market operation tutorial hence i’m not repeating the same here.
I’ve added a quick video below to show you how future trading takes place realtime :
As a starter, you should open a trading account first with the help of a broker. Choose you broker carefully as if he misguides you, you can face lot of problems in your initial days. So choose a good branded broker rather than going for some random brokers. I’ll suggest you to open your accounts under a broker’s branch office & not under a franchisee shop of that broker. If you can open your account in the broker’s main branch office, nothing better than that as you’ll get the best service from there.
What we discussed above, are the basic understandings of indian currency market trading & Once you’re tuned up with the basic ideas we discussed here, i’ll suggest you to read the article regarding TECHNICAL ANALYSIS . As you’ll have to learn technical analysis next, to know which currency to trade & where to buy/sell.
Related Lessons & MORE :
About the author.
RAJIB is a full-time stocks, commodity & Forex trader and Owner of FINANCIALHUBINDIA. His trading career began in 2008 and has followed a path similar to many traders. He tried nearly every indicator & it wasn't until he started using raw price action in 2010 that he became consistently profitable. Using this site, he is sharing his knowledge & experience based on price action trading which can be used & traded in any form of markets.
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hello….. can any of you actually explain profit and loss using a trading example. All the sites are full of same shit…… not a rocket science to understand lots and lot size. but how does it all work. how and when do i book a profit or calculate my losses……

How to do Forex Trading in India?
Trading in foreign currency is known as Forex Trading. You might have noticed that the value of the dollar is going up every day. Dollar exchange rate was Rs. 62 before few days and now it is Rs.64. Investors willing to take advantage of this appreciation in short and medium term can participate in currency trading.
Yes, it is legally allowed to trade Forex within Indian Exchanges like BSE, NSE, MCX-SX. As per RBI guideline, all Indian resident including banks and financial institutions can do forex trading in currency pairs. The main currency pairs are USDINR, EURINR, GBPINR and JPYINR. So, if you are trading with brokers who have membership in mention exchange it is absolutely legal.
How Forex Trading Works?
Forex Trading is same as that of equity trading. In equity trading rate of share matters while in forex trading exchange rate matters. You can buy or sell currency pair as per your expectation of movement in currencies. Please refer to the example given below for better understanding.
Suppose you want to take advantage of growing price of a dollar. The dollar is trading at Rs 64, you feel that price is going to appreciate and expected to reach at Rs 67 in few months you can enter into a long position by buying USDINR contract on the exchange. If the price goes to Rs 67, you get the profit of Rs.3 per dollar. So in the single contract of 1000$ you can earn Rs.3000. After entering into the contract if you see that Rupee is appreciating and dollar price is expected at Rs 63, you can ‘short close’ your position by selling currency future contract. If dollar price goes to Rs 63 you can gain Rs 1 per dollar by squaring off your position. Total gain on a 1000$ contract will be Rs.1000. However, if a dollar moves up and reach Rs 67, you lose Rs 2 per dollar. An investor can square off position anytime during the period of the contract.
You can take similar long and short position in EURINR, GBPINR or JYPINR.
Brokers for Forex Trading.
Forex Trading can be done with register Indian brokers. Most commonly used exchanges are MCX-SX – Multi Commodity Exchange and NSE – National Stock Exchange. At the international level exchange, COMEX is used as regulators. The currency market is regulated by RBI and SEBI. Best Brokers offering Forex Trading services in India are –
Forex Trading or Currency Trading is Risky and not for everyone.
Trading in forex carries a high level of risk and it may not suits everyone. Before deciding to do forex you should consider your investment objectives, risk carrying capacity and level of experience.
If you have any queries related to Forex trading it is advisable to take advice from an independent financial advisor.
Do you deal in forex trading if yes; Do share your experience!
Article by Raviraj.
Hi, I am Raviraj. I am passionate about money matters and finance. I have 12 years of rich experience in the field of financial planning, Investments & Insurance. I have written 1000+ article on this blog. If you like my efforts kindly subscribe to this blog and also let your friends know about this website by sharing.
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2 Comments.
Very Informative. The article answered many of my questions. Thanks and keep it up.

10 Ways To Avoid Losing Money In Forex.
The global forex market boasts over $4 trillion in average daily trading volume, making it the largest financial market in the world. Forex's popularity entices traders of all levels, from greenhorns just learning about the financial markets to well-seasoned professionals. Because it is so easy to trade forex - with round-the-clock sessions, access to significant leverage and relatively low costs - it is also very easy to lose money trading forex. This article will take a look at 10 ways that traders can avoid losing money in the competitive forex market. (There are no specifically forex focused programs, but there are still some advanced education alternatives for forex traders. Check out 5 Forex Designations .)
1. Do Your Homework – Learn Before You Burn.
2. Take the Time to Find a Reputable Broker.
Traders should also research each broker's account offerings, including leverage amounts, commissions and spreads, initial deposits, and account funding and withdrawal policies. A helpful customer service representative should have all this information and be able to answer any questions regarding the firm's services and policies. (Discover the best ways to find a broker who will help you succeed in the forex market. Refer to 5 Tips For Selecting A Forex Broker .)
Nearly all trading platforms come with a practice account, sometimes called a simulated account or demo account. These accounts allow traders to place hypothetical trades without a funded account. Perhaps the most important benefit of a practice account is that it allows a trader to become adept at order entry techniques.
Few things are as damaging to a trading account (and a trader's confidence) as pushing the wrong button when opening or exiting a position. It is not uncommon, for example, for a new trader to accidentally add to a losing position instead of closing the trade. Multiple errors in order entry can lead to large, unprotected losing trades. Aside from the devastating financial implications, this situation is incredibly stressful. Practice makes perfect: experiment with order entries before placing real money on the line.
Once a forex trader has opened an account, it may be tempting to take advantage of all the technical analysis tools offered by the trading platform. While many of these indicators are well-suited to the forex markets, it is important to remember to keep analysis techniques to a minimum in order for them to be effective. Using the same types of indicators – such as two volatility indicators or two oscillators, for example – can become redundant and can even give opposing signals. This should be avoided.
Any analysis technique that is not regularly used to enhance trading performance should be removed from the chart. In addition to the tools that are applied to the chart, the overall look of the workspace should be considered. The chosen colors, fonts and types of price bars (line, candle bar, range bar, etc) should create an easy-to-read and interpret chart, allowing the trader to more effectively respond to changing market conditions.
While there is much focus on making money in forex trading, it is important to learn how to avoid losing money. Proper money management techniques are an integral part of successful trading. Many veteran traders would agree that one can enter a position at any price and still make money – it's how one gets out of the trade that matters.
Part of this is knowing when to accept your losses and move on. Always using a protective stop loss is an effective way to make sure that losses remain reasonable. Traders can also consider using a maximum daily loss amount beyond which all positions would be closed and no new trades initiated until the next trading session. While traders should have plans to limit losses, it is equally essential to protect profits. Money management techniques, such as utilizing trailing stops, can help preserve winnings while still giving a trade room to grow.
6. Start Small When Going Live.
Once a trader has done his or her homework, spent time with a practice account and has a trading plan in place, it may be time to go live – that is, start trading with real money at stake. No amount of practice trading can exactly simulate real trading, and as such it is vital to start small when going live.
Factors like emotions and slippage cannot be fully understood and accounted for until trading live. Additionally, a trading plan that performed like champ in backtesting results or practice trading could, in reality, fail miserably when applied to a live market. By starting small, a trader can evaluate his or her trading plan and emotions, and gain more practice in executing precise order entries – without risking the entire trading account in the process.
Forex trading is unique in the amount of leverage that is afforded to its participants. One of the reasons forex is so attractive is that traders have the opportunity to make potentially large profits with a very small investment – sometimes as little as $50. Properly used, leverage does provide potential for growth; however, leverage can just as easily amplify losses. A trader can control the amount of leverage used by basing position size on the account balance. For example, if a trader has $10,000 in a forex account, a $100,000 position (one standard lot) would utilize 10:1 leverage. While the trader could open a much larger position if he or she were to maximize leverage, a smaller position will limit risk. (For additional reading, see Adding Leverage To Your Forex Trading .)
8. Keep Good Records.
9. Understand Tax Implications and Treatment.
10. Treat Trading As a Business.
It is essential to treat forex trading as a business, and to remember that individual wins and losses don't matter in the short run; it is how the trading business performs over time that is important. As such, traders should try to avoid becoming overly emotional with either wins or losses, and treat each as just another day at the office. As with any business, forex trading incurs expenses, losses, taxes, risk and uncertainty. Also, just as small businesses rarely become successful overnight, neither do most forex traders. Planning, setting realistic goals, staying organized and learning from both successes and failures will help ensure a long, successful career as a forex trader.
The worldwide forex market is attractive to many traders because of its low account requirements, round-the-clock trading and access to high amounts of leverage. When approached as a business, forex trading can be profitable and rewarding. In summary, traders can avoid losing money in forex by:
Being well-prepared Having the patience and discipline to study and research Applying sound money management techniques Approaching trading activity as a business.

How to earn from forex trading in india

H e had an ideal, high-paying managerial job at 23 and did not need to give it up for what is generally seen as a high-risk business.
Yet, Dayanand Gupta quit his job and ventured into foreign exchange trading. The move paid off and two years later, today, Gupta is successful, with a grip on the fundamentals of the business.
Many prefer to stay away from forex trading, the largest financial market globally. Its daily turnover exceeds $3.8 trillion, three times the combined business of the equity and debt markets in United States. Like the commodities' market, the forex market trades round the clock.
Forex trading, simply, is exchanging one currency for another. Most are traded against the dollar. Other highly traded currencies are the euro, pound, yen, Swiss franc and Australian dollar.
The first currency quoted in a currency pair on forex is called base currency, which is generally the domestic currency. The second currency is called the quote currency and is typically the foreign currency.
For example, if you were trading in rupee-dollar, rupee would be the base currency and dollar the quote currency. The price shows how much quote currency is needed to get one unit of the base currency.
In this market, the volume of trade is expressed in the base currency. Example: In a 100,000 rupee-dollar trade, 100,000 is the face value and is a standard contract or a lot. No matter which currency you have in your account, the trading software automatically sets the exchange rate.
The profit or loss in trade is expressed in the quote currency, as the currency pair price is given in it. For instance, if you buy euro-dollar at 1.3000, and sold it at 1.3010, your profit is $0.0010 or 10 pips for each euro. A pip is the smallest measure of price move on an exchange.
Spread: Each trade has two prices - bid and ask. The bid price is the rate at which the broker buys and you get on selling. The ask price is the offer price at which the broker sells and you pay to buy. The difference between bid and ask price is the spread (broker's profit).
In a euro-dollar trade at 1.4000/1.4003, the spread is 3 pips. On trading 100,000 euro-dollar, the broker earns 100,000 x 0.0003 = $30, irrespective of your profit or loss. If the currency pair rises 10 pips (from 1.4000/1.4003 to 1.4010/1.4013), you will earn only 7 pips because you bought at 1.4003 and sold at 1.4010.
Typically, a lower spread is better for traders, as it gives higher profit.
Leverage and margin : In case of a small investor who invests, say, $1,000, if the price moves up by one per cent, you will earn $10 and your broker only $0.30. It's not a great deal for you; worse for your broker. Thirty cents will hardly justify his salary.
Ergo is the concept of leverage financing, where a trader deposits only a presumed risk (margin) and the rest is provided by the broker. Margin requirements vary from one to five per cent, depending on the broker. A margin of one per cent may translate into a trade of up to $100,000, even if you have only $1,000 in your account. The margin corresponds to a 100:1 leverage.
Applying a 100 :1 leverage, as above, your and the broker's profits are multiplied by 100: you get $1,000 (100 per cent of your investment) and the broker gets $30. The flip side -- if the price falls one per cent, your entire capital is lost.
Margin call : On opening a trading position, you can designate a part of your capital as collateral on your margin, which will be set aside and protected. On a capital of $3,000, say, your margin is $1,000. You use $2,000 to trade and if you lose, the broker will close your position and you will get back the collateral.
Let's say you bought 100,000 units of euro-dollar at $1.3217, which rose to 1.3227. You immediately sell those units and get $100 back. But, if the rate declines to 1.3207, you stand to loose $100.
Some losses are inevitable for any trader. However, the key is to limit losses by using stop-loss and controlling risk. If you set a limit order, you would have realised the potential profit without having to monitor the trade closely.
Caution : Making $100,000 from $100 is possible in this trade, provided you follow the rules of the game - be careful. "However, investors tend to equate currency with stocks. A big mistake," said Pramit Brahmbhatt, CEO, Alpari India. The risk factors are more complex here. Any change in macroeconomics is a big hazard, adds Brahmbhatt.
Rekha Mishra, senior research analyst, Bonanza Portfolio, concurs: "Unlike other markets, forex is highly volatile and most liquid. One should follow certain ground rules here in order to manage risk."
"A demo account may expose you to the heat of a fast-paced, decision-making process," said a forex trader. "One can also start trading with mini or micro accounts to reduce risk appetite." But, do not draw conclusions based on earlier trades.
Despite being a 24-hour market, all hours may not be equally beneficial for trading on forex. You may plan your trading to catch the highest trading hour(s) to maximise profits. Freshers can take small exposures till they gain confidence.