Currency trading is an attractive trading segment in the stock market. Globally, $5 trillion of world currencies are traded across different indices. Within a pair, there is a base currency, and then there is a quotation currency.
Mathematically: Base Currency/Quotation Currency= Value
For instance, if the pair is USD/INR, we generally say 1 USD = 72 INR.
If you put this relationship in the formulae mentioned above, then USD is the base currency, INR is the quotation currency while 72 is the value.
Secondly, if you are looking to trade in currency, then there are two price points:
Bid Price and Ask Price
i.e., prices at which specific currencies can be bought or sold.
Thirdly, the unit of price fluctuations in the ‘Value’ is represented in the form of PIPs where PIP abbreviates for percentage in point.
About Currency Derivatives
The FX future or Currency Future is a contract to exchange one currency for another currency. At a specified date or expiry in the future at a price (exchange rate) that is fixed on the purchase date.
On NSE, the price of a futures contract is in terms of INR per unit of other currency. The pairs available are (1) US Dollars (USD), (2) Euro (EUR), (3) Great Britain Pound (GBP), and (4) Japanese Yen (JPY).
Cross Currency Futures & Options contracts on EUR-USD, GBP-USD, and USD-JPY are also available for trading in the Currency Derivatives segment.
Currency Futures and Options are different from Equity futures: In currency trading, the underlying asset is the currency pair at the currency exchange rate as compared to equity futures where the underlying asset is the equity share of the respective company.
Participants in Currency Trading: Traders-Importers/Exporters; Stockists; Hedgers; Arbitrageurs; Speculators
Date of expiry: All Currency contracts expire two working days before the last business day of the expiry month at 12 noon.
Trade timings of Currency trading: In NSE for Currency Derivatives, the trade timings are as follows: Trading Session- Monday to Friday- 9:00 AM to 5:00 PM.
Currency trading in India (INR currency pairs)
Currency trading is where you buy and sell international currencies. In India, you can only trade currencies that are paired with the Indian Rupee. There are four such regulated pair
• USDINR (US dollar)
• EURINR (European Currency)
• GBPINR (Great Britain Pound)
• JPYINR (Japanese Yen)
Note: Of the above, only Resident Indians and NRIs can deal with the USDINR pair. You can trade these currencies on exchanges like NSE, BSE, and MCX-SX.