Posted by forex at 3:30 AM
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1. Understand the Indian currency futures market. The market is primarily focused on the exchange rate relationship between the US Dollar and Indian Rupee. Unlike spot foreign exchange, in which one currency is bought against the sale of the other, Indian currency futures allow traders to bet on the anticipated direction of one currency without short selling the other. Indian currency futures are traded domestically on the National Stock Exchange, in Mumbai, and internationally on Dubai Gold and Commodities Exchange, based in Dubai.
2. Open a brokerage account. You could either open an Indian futures brokerage account, with an outfit like JV Capital Services, or open an account with a US or international broker who offers you access to the Indian marketplace. Interactive Brokers is one of the few US-based brokers with an entire division devoted to Indian stock and futures trading. Richcomm Global Services is another brokerage that offers access to Indian currency futures. Be aware that if you use an Indian broker, all of your trading capital will probably have to be denominated in Rupees, exposing you to exchange rate risk if the Rupee were to significantly lose value relative to the Dollar.
3. Study and follow the fundamental factors that affect the price of the Indian Rupee in relation to the US Dollar and other international currencies. The primary drivers of price change are interest rate fluctuations, and the factors that have the greatest impact on interest rates, such as GDP growth, inflation, trade balances, and international money flows. Keep track of factors that affect both the Rupee in absolute terms, as well as relative to the US Dollar.
4. Become acquainted with technical analysis, and use it to decide on when to buy and sell Indian currency futures. Technical analysis is the use of price charts and indicators to better predict what prices will be doing in the future. It can help you better determine if the Rupee is overvalued or undervalued relative to the Dollar, and at what price you might consider entering a long or short position in the currency futures market.
5. Implement a comprehensive risk and money management plan. Indian currency futures, like all futures contracts, are high risk, high reward instruments, and if you trade without stop losses, there's a very good chance you'll eventually get caught on the wrong side of a big move and lose your entire account. When making a trade, always know exactly how much you're willing to lose ahead of time, as well as at what price you will be stopped out of the trade.