How To Trade in Currency Futures?

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Step 1: Open a trading account with any currency brokerage for an initial margin of 2-5 per cent per contract. Say, you want to take an exposure of ~55,000, the margin would be ~2,700

Step 2: Documents required for KYC are proof of identity, residence and bank account.

Step 3: You have to take positions to trade. Say you need $30,000 (~16.50 lakh) after a year. You can book a contract of a year by rolling over one-month contracts for a year for the amount

Step 4: On maturity, if the actual contract value increases to $32,000 (rupee appreciates), then the brokerage pays you the difference. And, if the value falls to $28,000 (rupee depreciates), you pay the difference of ~1.10 lakh

Step 5: Banks also allow trading in currency futures, but not necessarily for retail investors. While banks are known to charge very low margins for corporate customers, retail investors can be charged 10 per cent or more, as the ticket size is low

Step 6: Banks will insist on knowing the reason behind the trade, to meet KYC needs.

Step 7: Documentation with banks is more stringent than with brokerages

 

Happy Investing!!

 

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