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Currency Trading is getting bigger day by the day. The exchange of foreign currency has made people a lot of money. To manage all that this market has to offer you are going to need some forex trading strategies. These strategies will teach you exactly how to make money in the forex market.
Below mentioned links for Educational Purpose Only. These links Contains Lot of informations for investor Education especially for beginners and Learners.
Beginners can use these blog informations for paper trading practice only. Strictly avoid realtime trading. A value date is a day on which the transaction takes place.
We have Four type of rates available with banks: Spot rate, Cash, Tom and Forward rate: Value Tomorrow Spot rate: A Nostro account is an account held in a foreign country by a domestic bank, denominated in the currency of that country.
A Vostro account is a local currency account maintained by a local bank for foreign bank. Nostro and Vostro accounts are used to facilitate settlement of foreign exchange and trade transactions. It is a facility provided to exporters, to credit per cent of their foreign exchange earnings to the account, so that the account holders do not have to convert foreign exchange into Rupees and vice versa, thereby minimizing the transaction costs.
No interest is payable on EEFC accounts. Forward premiums and discounts is an interest rate differential between two currency. If the difference between forward exchange rate and spot exchange rate of one currency is a positive value, it is known as forward premium and if it is a negative value it is known as forward discount.
Interest rate differential and Demand and supply of currencies due to partial convertibility of rupee and immature money market in India. An agreement made to convert one currency into another currency at a specific rate on a specific date.
Forward contracts are used to lock in exchange rates a forward rate for a specific future date, or for a range of dates. Forward contracts are often used as a tool to eliminate the impact of adverse currency moments. A forward rate is calculated by taking the spot rate and adding or subtracting forward points.
Forward rates are determined by the interest rate differential between the countries of the two currencies which are being exchanged. Export can avail following working capital finance At Pre-shipment stage: Ans Export can avail following working capital finance Non funded Working Capital finance: Letter of credit and Bank Guarantee Trade Credits: Buyer Credit and Supplier Credit.
Forward contracts booked of the underlying exposure, once cancelled, cannot be rebooked. Under probable exposures based, forward contracts booked by both exporters and importers will be on fully deliverable basis. In case of cancellations, exchange gain, if any, should not be passed on to the customer. Therefore, in tumultuous times investors and traders are comfortable parking their monies in this asset class.
Many factors affect the opening rate of the currency for e. If the markets trade substantially higher than previous closing, traders and investors expect the rupee to open strong against its counterparts.
It does not change the underlying fundamentals of India or the rupee though. Also some orders kept pre market may cause adversity. In the current scenario of a weaker Rupee, one should look to cover on every dip. Advisable to do so when premiums are good and costing is taken under consideration. Although, booking long forwards at higher rates and cancelling at lower levels yields no gains as per latest RBI policy. Because of the presence of Derivatives in the markets. Dollar demand from Oil, Gold and other importer would also cause rupee to depreciate despite positive stock markets.
Pre Shipment Credit in Foreign Currency. PCFC liability can be paid off by converting pre shipment credit into post shipment credit in foreign currency and Post shipment credit needs be liquidated out of the export proceeds of the relevant shipment.
Currently the rate is unfavorable for me as an importer. In current market, Rupee may touch to 55 levels also. Yes, one can do the above transaction through 2 legs. Economic is in slowdown oil price goes down and gold and USD is in demand to due safe haven assets. The markets are volatile, especially in the current scenario and predictions change quickly. The stop loss strategy is best risk management tool in the financial markets. What is the relevance of this strategy for importers?
When Rupee is in appreciating mode and long term forward annualized premium quoting at higher you can go for long term covers. So pre-utilized long term covers whenever rupee appreciate sharply. The level of confidence in the economy of a particular country also influences the currency of that country. There are several reasons. A rise in export earnings of a country increases foreign exchange supply.
A rise in imports increases demand. These are the objective reasons, but there are many subjective reasons too. Some of the subjective reasons are: It is an agreement to buy or sell a specified quantity of an underlying currency on a specified date in future at a specified rate e.
Currency futures are needed if your business is influenced by fluctuations in currency exchange rates. If you are in India and are importing something, you have done the costing of your imports on the basis of a certain exchange rate between the Indian Rupee and the relevant foreign currency.
By the time you actually import, the value of the Indian Rupee may have gone down and you may lose out on your income in terms of Indian Rupees by paying higher. On the contrary, if you are exporting something and the value of the Indian Rupee has gone up, you earn less in terms of Rupees than you had anticipated.
Currency futures help you hedge against these exchange rate risks. Every business exposed to foreign exchange risk needs to have a facility to hedge against such risk. Exchange-traded currency futures, as on MCX-SX, are a superior tool for such hedging because of greater transparency, liquidity, counterparty guarantee and accessibility.
Since the economy is made up of businesses of all sizes, anything that is good for business is also good for the national economy. The exchange-traded futures, as compared to OTC forwards, serve the same economic purpose, yet differ in fundamental ways.
Exchange-traded contracts are standardised. In an exchange-traded scenario where the market lot is fixed at a much lesser size than the OTC market, equitable opportunity is provided to all classes of investors whether large or small to participate in the futures market. The other advantages of an Exchange traded market would be greater transparency, efficiency and accessibility. Thus, introduction of exchange-traded futures help in overall development of the forex market in the country.
Any resident Indian or company including Banks and financial institutions can participate in the futures market. RBI has allowed Banks to participate in currency futures market. AD Category I Banks which are urban co-operative banks or state co-operative banks can participate in the currency futures 09 market only as a client, subject to approval thereof, from the respective regulatory department of RBI. I have the interbank market, anyway. Small and mediumsized clients of Banks cannot directly participate in the interbank market.
If a Bank is a member of a currency futures exchange, it can trade on behalf of its small and medium-sized clients, who otherwise would not have been able to benefit from fluctuations in currency exchange rates. Thus, Banks can increase their customer base if they become a member of a currency futures exchange. Banks themselves can also benefit from a currency futures exchange by arbitraging between the existing interbank market and the currency futures exchange.
Larger participation in a currency futures exchange gives the exchange platform a greater vibrancy than the interbank market, which is limited to Banks. These are well within the reach of most small traders. All transactions on the Exchange are anonymous and are executed on a price time priority ensuring that the best price is available to all categories of market participants irrespective of their size. Yes, it does, if you want to invest purely as an investor. You can benefit from exchange rate fluctuations just as you can benefit by investing in equities in the stockmarket.
However, as in the stockmarkets, you also stand to lose money if the price movements are not in keeping with what you had anticipated.
Participating in a currency futures exchange is risky, just as the stockmarket is. You should therefore be knowledgeable about the currency market if you want to participate as an investor. On a currency exchange platform, you can buy or sell currency futures. You thus avoid exchange rate risk that you would otherwise have faced. Risks in currency futures pertain to movements in the currency exchange rate. There is no rule of thumb to determine whether a currency rate will rise or fall or remain unchanged.
A judgement on this will depend on the knowledge and understanding of the variables that affect currency rates. Indian currency futures enable individuals and companies in India to hedge and trade their Indian Rupee risk. Most international exchanges offer contracts denominated in other currencies.
The contracts shall have a maximum maturity of twelve months. All monthly maturities from 1 to 12 months are available. Spread contract give users the benefit to enter two calendar contracts simultaneously without the risk of partial one leg execution and at a lower impact cost.