Complete Guide on USD INR Trading
Currency trading is an ongoing process that remains shut only from Friday night till Sunday night. Nevertheless, for beginners in forex trading, the 24-hour trading processes could be deceptive.
The fundamental currencies are usually traded during market hours. This further implies that some specific currency sets will essentially have more volume during those specific trading sessions. So, the traders who depend upon the dollar sets will find more volume in the US trading hours.
USD INR Trading in the Forex Market
In the forex market, the trader needs to have one currency to sell another currency. Then, almost every single currency gets evaluated till the fourth decimal point. A Percentage in Point (PIP) is an increase in trade. The forex exchange is a global marketplace for trading different currencies. And because of its global reach, forex trading remains one of the biggest and most fluid markets worldwide.
Different currencies trade against each other as the exchange rates are set. For example, EUR (Euro) against USD (US Dollar).
Forex markets are like the share markets where stocks, options, and shares are traded. Here, the market members use foreign exchanges as support against the international currencies and the growing interest rate hazards for a diversified portfolio, amongst other reasons.
Currency trading is usually done in pairs. So, as a first-time trader in India, you can take up the combination of USD INR trading, EUR INR trading, JPY INR trading, or GBP INR trading (INR = Indian Rupee or ₹). Each of these pairs has two different currencies. One is the base currency, and the other one is the quotation currency. For instance, in the case of USD INR trading, INR is the quotation currency while USD is the base currency. So, the value of one USD is around ₹74.64*.
(*Prices are subject to fluctuation. Please check the prevailing exchange rates before trading.)
So, if you are going for USD INR trading, you can expect that the currency pair value will go up. Also, the price will include the bid price and the ask price.
What Impacts the INR-USD Prices in the Forex Market?
Usually, general economic events can impact the currency pair prices. Also, as it involves USD and INR, any major geographical events in either of the countries may cause movement in the prices.
Another very popular term related to currency trading that you may have come across is PIP. When the currency reference rates are decided by the RBI, the PIP quote is calculated till the 4th decimal point. So, even a tiny difference in this fourth decimal point can greatly affect currency prices. The currencies are quoted worldwide till this 4th decimal point. For USD INR trading, the PIP is fixed at a rate of 0.0025.
USD INR Trading in the Derivatives Market
Currency derivatives allow the trader to take a hedge against international currencies like the Euro, US Dollar, Pound, and the Japanese Yen. Nevertheless, as most of the country’s trading and commerce happens in USD, INR-USD trading is one of the most popular in the derivatives market. Therefore, you can take part in the currency derivatives market in India for trading in forex and for managing your basic exposure to foreign currency trading.
Here, a trader can trade in call options and put options on the USD-INR pairs. There is no delivery of the dollar, and the difference exchange takes place in INR. However, they are European in nature. This means the options could be either squared off during the monthly trading or could be exercised at the time of its expiration. If the Dollar strengthens against INR, the buyer of put options profits, whereas if the dollar weakens, the buyer of the put option gains.
In a USD INR futures contract, you can buy or sell a dollar at a predetermined price and set a delivery date in the future. The futures are settled in INR in cash.
Trading Strategies for INR-USD
One of the most widespread trading strategies used by regular traders is the price action strategy. It basically depends upon the bearish and bullish nature of the price action. Apart from this, there’s the trend trading strategy. It is when the traders depend upon the trend analyses. Also, here the currency price movements are identified prior to deciding an entry point.
Next comes counter-trend trading. Here, the trader can go against the trend of range trading where the currency price range is used for trading purposes.
Then there is breakout trading where traders can enter the market at a point when the prices are breaking out from an earlier trading range.
For a trader wishing to trade in positions, deep knowledge about the market and trading expertise is essential. Position trading makes use of chart analysis. It involves selling currencies with a low-interest rate and purchasing currencies with high-interest rates.
As a beginner in forex investments, all of these may seem a little overwhelming. However, forex trading needs a lot of skills and knowledge of the forex market. Also, there needs to be an understanding of the world events impacting the forex prices.
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Are Forex Trading Platforms Illegal in India?
Forex trading platforms are not legal in India. However, you can engage in currency trading online, subject to regulations and conditions of the forex trading or currency trading market in India. You can only do forex trading online in a limited capacity and through approved mechanisms....Read More
Frequently Asked Questions
The advantages are as follows -
- Lesser transaction charges – No STT/CTT is applicable in Currency Futures & Options trading. Also, the stamp duty is lower than other products traded on an exchange.
- Reduced contract size – All currency pair trading contracts are of a value that’s less than ₹
- Less volatility – In comparison to some other products available for trading like gold, or Nifty, etc., USD INR trading has less volatility. Therefore, these are to manage a position in the market.
- Long trading hours – As the currency market trading starts from 9 am and goes till 5 pm, traders can get additional time to trade in currency pairs and get additional time to react.
Lower margin – The margin mandated for trading is usually anything between 2.5% to 5%, depending on the currency pairs.
Currency pair trading in futures and options happens from 9 AM to 5 PM, Monday to Friday.
Currency trading is the simultaneous buying and selling of one currency against another. It is like the currency pair trading of USD INR.
Currently, 7 types of currency pairs are available in futures and options trading: USD INR, EUR USD, EUR INR, JPY INR, GBP INR, GBP USD, and USD JPY.