If I choose to close this position, he is how much I would make –

Going back to the short trade, here is how the Marubuzo panned out –Īfter initiating the short, the currency pair declined 67.6000. This means to say, for every pip or every tick movement you make Rs.2.5/. How much money would you make per pip in the USD INR pair? Well, this should be easy to figure out – So when the USD INR moved from 67.9000 to 67.9025, it is said that the currency has moved up by a pip. A pip/tick is the minimum number of points by which a currency can move. This is called the tick size or in currency parlance, a ‘pip’. In fact, it is a norm world over to quote the currency to 4 th decimal – in case of USD INR, this is 0.0025. Even a minor difference at the 4 th decimal can alter the foreign reserves by a large degree. When RBI states the reference rate, they quote upto the 4 th decimal. There is a reason for this – when it comes to currency futures, a number as small as this – 0.0025 is considered big. Notice how the currency futures are quoted – they go upto the 4 th decimal digit. On the other hand, currency sticks to a tight trading range compared to equities-hence higher leverage.

This should give you a sense of how leveraged currency trading really is. In contrast to equities, the margin charged in currencies is way lower. Out of this, I’m guessing about 1.5% would be SAPN margin requirement (read as the minimum margin required as per exchange) and the rest as exposure margin.įurther, the idea is to short 10 lots, hence total margin required is –Ī point to note here – when trading equity futures, one has to earmark anywhere between 15% and 65% of the contract value as margins, this obviously varies from stock to stock. Therefore on a contract size of 67700, this works out to – The margin required for this can be fetched from Zerodha’s margin calculator here is the snapshot of the same.Īs you can see, the margin required to initiate a fresh position in USD INR is about Rs.1,524/. The contract value of 1 lot of USD INR = Lot size * price Note that I’m not trying to justify a trade here, my objective is to showcase how the USD INR contract works. One can initiate a short trade based on this, keeping the high of the Marubuzo as the stoploss. This is the 15-minute chart of the USD INR pair, as you can see the encircled candle has formed a bearish Marubuzo. To give you a sense of how this works, let’s take an example – RBI Reference rate on the day of Final settlement Hence roughly about 2.5% is the overall margin requirement. Usually, SAPN is about 1.5%, and exposure is around 1%. Note, equity derivatives have an expiry upto 3 months.Ĭontracts trade till 12:30 PM, 2 days before the last working day.Įquity derivatives continue to trade till 3:30 PM of the expiry day. Monday to Friday between 9:00 AM to 5:00 PM Inequity derivatives, the lot is number of shares, but here it’s a dollar amount Here are the salient features of the USD INR pair – Particular The contract specification of the USD INR futures gives us insights on trade logistics. Now, assuming you understand these concepts fairly well, let us begin by slicing and dicing the USD INR futures contract. The currency and commodities market is largely a Futures market hence a working knowledge of these derivative instruments is the key. If you are not familiar with these topics, then I’d strongly suggest you read through these modules before proceeding further. Technical Analysis plays an important role in setting up short term currency trades, so we’ll assume you know Technical Analysis as well. We make an extremely critical assumption at this stage – we will assume you are familiar with how Future and Options contracts work.

1 usd to rupee