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Currency Trading in India | How does Currency Trading Works?

Cross Currency Trading in India

Let’s learn something new today ” Cross Currency Trading in India”. In our previous article, we have covered Currency Trading which is synonymous with Cross Currency Trading. We will try and make you understand bit by bit so that you don’t forget the basics of Cross Currency Trading in India.

Also Read What is Commodity Trading in Zerodha? | How Does Commodity Trading Works?

What is Currency Trading in India?

Cross Currency refers to a pair of currencies. Basically to trade in currencies means the trade of one’s country currency with another. For example, USDINR in which the dollar is the currency of the US and INR is the currency of India. Globally trading in currency takes place over the counter market and that market refers to as a Forex market.

It is considered one of the largest markets in the asset class globally because of its volume. Its daily turnover is around 6.70 trillion. The foreign exchange market consists of investors, banks, investment management companies & brokers which facilitate the buying and selling of different currencies.

In today’s time no nation operation without having trade relations with other countries around the globe. Due to the rise of export & import among countries, the demand for cross currencies raised. Export is not at all new to India, from medieval times, countries like India is involved in trade activities. As per the survey of 2020, India is the largest exporter of diamonds & refined petroleum.

Also Read Government Bonds India – A Detailed Guide for 2022

How does Currency Trading Works?

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Cross Currency trading works similar to the buy and sell of securities. The only difference you will find here is you buy one currency by paying another currency. As forex trading is done in pairs and India allows the pairing of these currencies only (USD/INR); (EUR/INR); (JPY/INR);(GBP/INR); (EUR/USD); and (GBP/USD). You profit if the currency you buy moves up against the currency you sold.

For instance, let’s say the exchange rate between USD and INR is 1 to 0.0133685. If you buy 1000 dollars, you pay around 74800 Rs in INR but if the currency rates move up to 1 to 0.0133333 you can sell those 1000 dollars for Rs.75000 thus making a profit of Rs.200.

Also Read What is MCX in Zerodha? – Charges & Trading Time | How to Activate?

Zerodha Trading Charges & Margin

Let’s understand the brokerage charged by Zerodha on Currency Trading:

Zerodha chargesCurrency futuresCurrency options
Brokerage0.03% or Rs. 20/executed order whichever is lower0.03% or Rs. 20/executed order whichever is lower
STT/CTTNo STTNo STT
Transaction chargesNSE:
Exchange txn charge: 0.0009%
BSE:
Exchange txn charge: 0.00022%
NSE:
Exchange txn charge: 0.035%
BSE:
Exchange txn charge: 0.001%
GST18% on (Brokerage + transaction charges)18% on (Brokerage + transaction charges)
SEBI charges₹10 / crore₹10 / crore
Stamp charges0.0001% or ₹10 / crore on the buy-side0.0001% or ₹10 / crore on the buy side
Source: Zerodha

The margin required to trade-in currency is quite little as Rs1750 for one lot. Generally, you need to maintain 2% of the contract value. The margin varies from currency to currency as below shown:

Cross-currency pairs are a great way to explore for those involved in forex trades. It makes it possible to fix positions in the forex market and unlikely pairs which have not been very extensively traded in the past and make profits.

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