Currency Market का Trading Strategy | #Learn2Trade Session 43
Welcoming you all to session #43, I’m Vivek Bajaj and I’m in the market for a long time and teaching trading to you & Annapurna Ji. So, Annapurna Ji, we are learning multi-asset trading. Had taught you equity, we started currency. In the previous video which we recorded a few minutes ago only, I had told you about the basics of currency. How was it? - Very interesting. - It is. Telling the truth. If you enter into what you listened to, the currency is a drug. It is such a nice drug that you will get so high because is currency is a core thing. And the one understanding it.
For him, the journey becomes very good. Today in this video we will discuss what can be traded looking at currency? Then let’s distribute into two parts, 1- How to trade in currency? 2- Looking at currency how to trade in the equity? See a benefit came. This is only the power of commodity and currency that you can trade in them but with their information You can trade in other assets too because it is linked so well. So when you talk about currency trading then let’s go-to trading view once. I have made a template and in that, I have put a graph of the currency I’m taking. 21 Period Moving Average. 55 Period Moving Average.
And the dollar Index at below. Why so? Because it’s everything.-Right. -Everything will work according to them only. We don’t have any standing. If it is saying that currency will get strong then it will go up and vice versa. So this is like relative strength for us? -Exactly. But we aren’t using RS Model because USD v/s INR is already RS. It is Rupee v/s Dollar only. So, if we put one more Dollar Index then there will be confused but we have to track it on a stand-alone basis. You will have to make a watchlist too in trading view which will be a macro watchlist. In watchlist, Equity and under it DAU JONES, NIFTY, BANK NIFTY, and Emerging Market Index meaning how the worldwide equity market is performing.
And under the currency, USD-INR, from where to search? Add here. Search and it will come. Over here i is of 2-3 kinds. Idc, OANDA all these USD-INR being traded are spot USD-INR that is being traded worldwide. Moreover, that rate & India’s rate is the same only. This currency is not futures-based. It is spot rate. Both are different. If want to see future rate then see the NSE website. But can look at the spot and make a judgment to trade in the future. -IDC or QUANDA? -Both can be taken. More or less both are the same only. All these are brokers outside that give you the facility to trade Which we cannot do because we are not allowed to do. outside people can do so for them IDC & OANDA are there and many more too. and after that in commodities
Sugar, gold, zinc, oil, brent, copper. After currency we are going to record in each commodity too so then we are going to study each commodity in detail. So, I will track commodities and their futures too? -Both, spot-future can be done. There is not much difference in price between both. Co-relationship is high meaning it has a direct relationship. So, I always see a chart for Spot because it has no continuity problem. And trade in the future. And after that, we have to see VIX meaning Volatility Index that what is the volatility worldwide? So in CBOE, VIX is traded. It is a type of exchange where VIX is traded which I track. And India VIX, not traded, but in NSE.
You will get a symbol of it. I track that. I see BITCOIN. Why? I don’t understand it. I am learning too. Might understand. But bitcoin is an asset in which money is going. So if it’s falling meaning money is going out. Then money coming in and going out is very necessary. Because it will impact the market worldwide. -So if it’s going in BITCOIN meaning going less in other markets?
Have to understand it. We cannot conclude it. Because it is not so 1+1=2 Always remember 1+1=2 is not true in the financial market. It is approximately 2. Sometimes it can be 1.5 and 2.5 too. It’s a probability that if you draw a normal distribution curve then The chances of becoming 2 are high. But it can go 2.5 too. So then you will say you taught wrong that 1+1=2. It’s not possible
Not necessary that it will happen. And 10year yield of US meaning if someone (bank rate) wants to borrow for 10 years in the US It has to give 1.5% interest. In the previous video, we talked about Interest Rate Differential. US 2% & India 6% then this difference Is not for free. This will only tell what will the currency rate in the future. We will watch that today. Then US interest rate is important to see Because all the money is in the US. -So this is the rate of interest for us? -If interest rates will increase in the US then money from other countries will come out And enter is us and if it happens then DOLLAR? -Will get strong. -Great Annapurna Ji. You are on right track. Then if the dollar gets string then what will happen to other assets? -it will lessen. -Now you are slowly understanding inter-market relationships.
Friend, you too might be understanding? If yes then like the video. I Will love it, the more the like the more youtube will make people understand. So, you like. This is one of my templates. I will export it and give it to you. I Will put the link below so the one wanting to import it can do it. But this is a design for me. This is my weekly chart because in Currency I make a weekly view. But you can decide to emerge whether you want to trade daily? Or every 5 minutes? Do intra-da trade? Do swing trade? You can do anything. This is such a beautiful instrument. This currency market runs for a longer time. In India, USD-INR starts at 9 am and ends at 5 pm More time is available.
The worldwide currency market runs for 23 hours. So people trade USD for 23hours. -So it’s very volatile? Yes, but during day time it’s volatile, at night they sleep. But if you see the global map then there is a country that’s awake And then it sleeps and other countries awake. So, someone or other is awake. Then the one awake wants the currency to trade. So, USD is quite actively traded obviously when the US market opens the volatility is more because at that time active market participation happens.
And when everyone sleeps the volatility is less. People seeping in the US, then which country people are awake? Japan. People over there don’t do much trading. It’s not volatile there. They trade in YEN so it has volatility. So, when you tracking, you will have to track big ones too. I forgot to add YEN. So let me add it. How to do it? Just YEN against USD to be added here. So, this is my YEN rate.
Now how to trade it? Like I said you can trade Intraday. Always understand that whenever trading, you have to understand the cause-and-effect relationships. Because something happening will have some impact somewhere. And you cant participate which is going to happen. Because you are too little so you cant initiate any movement. But can participate in the effect. Like this can happen so enter So when we do trading we do cause&effect that NIFTY increased but this stock didn’t rise. To enter, as it can rise. So when you are doing intraday then for a small period, watching actions is important and when you are doing long term trading, swing Then watch long-term action. So that is a facility in technical charting that you can modify that thing. So, let’s make it intraday once.
So, when you are trading INTRADAY then you have to see 15mins chart. So 15mins chart having the same moving average. Now the dollar index is here as per 15mins So what do you think is happening in the dollar in this? Simple trend lines. It is upwards in terms of 15 mins then what should be Rupee? Go up. Rupee should go up? The rupee rate should go up but the Rupee will get weak. As it is in dollar terms. But colloquy we say that rupee will go up. Meaning rate. So here I should take and work because the dollar is upwards. This is the most simple explanation that I’m seeing technical chart and seeing dollar and on that making a view on the rupee.
And the moving average over here is confirming that trend is upwards. So how will I work? Stop loss will be below of support zone. Till the time dollar is upwards. I’m okay with it. If the dollar is going down-trending then I will square up this position. It is a 15mins chart. So active trading. For intraday. -How much risk is involved in this when I do USD-INR? -Generally, volatility is less in Intraday. There are many stocks in equity with 5% volatility. The whole day volatility in USD-INR is 0.25% 0.3% Risk is less and so is the reward. Will not move only whole day then your money won’t be made only. But it has a very big advantage that when we trade in this then margin requirement is less. In this, you will trade in the spot? -No. -You will not g to currency exchange and take 1000$ and sell it after some time.
You will trade in futures. So, let’s take a detail of futures. When you will go under NSE then in about, in the product there are currency derivatives. So, contract information of currency derivatives. Whenever you trade it is necessary to know the contract details that what it is! In currency, the contract information is in USD-INR, for 1000USD there is a contract. 1000USD price 73 meaning a contract value is 73,000
The contract value of 73,000 is not very high and to trade that you have to give a margin too which is approximately 2.5% 2.5% of 73,000 is like 1,800 meaning you can trade in the currency market with 1800 rupees -which is not a lot. If you will go to trade in the equity market then you will buy options, then you can work in less capital, and margin is required if you are doing option selling. If doing future, then the margin is required, and if in cash market then you can do as much capital you have. So if you have to take leverage And work in maximum leverage then the currency is the best instrument. In this volatility is less that’s why margin is less. So whole day money won’t be made that much but return to get multiplied have more chances because leverage impact of margin is very high.
So, you have USD-INR, EUR-INR, GBR-INR, JPY-INR. tHIS IS OF 1000 DOLLAR, 1000 EURO, 1000 POUND & this of 1,00,000 YEN. Because JPY’s price is less? -Yes. In these options is available too. We had done sessions of Options although won’t talk about it much now. But the discussion that we had done for Options in the equity market in the previous sessions, can be done with the same thought process in currency too. Buy call option, sell a put option. Make a spread. Straddle and strangle can be done. Remembering all that? -Yes sir. Then if you want you can do it. Currency character is different, Volatility profile is different. Let me show you an example.
Over here you search USD-INR. So, these were the contracts. Let’s go to Option Chain. Remembering somethings? Over here you search USD-INR. So, these were the contracts. Let’s go to Option Chain. Remembering somethings? Weekly as well as Monthly. So, every Friday there is an expiry on this. And when is it monthly expiry? 2 days before the last working day. Weekly as well as Monthly. So, every Friday there is an expiry on this. And when is it monthly expiry? 2 days before the last working day. Then in that only they changed expiry to 2 days before the last working day. such that if any obligation happens then it will be covered till month-end.
Because spotting is T+2 and the futures are even T+2. Map the month-end So futures contract expires 2 days before the last day. And their timing of expiry is afternoon 12:30 pm because RBI takes out a reference rate during this time. RBI reference rate- famous too. That is a benchmark rate that RBI has said that if this is the rate for currency then it’s like an order. How does RBI take that out? It does polling and takes views from multiple banks and after that takes out rate and calls it final and on that rate, the contract gets settled. So, the RBI reference rate is taken out daily. So the options weekly contract will expire based on Friday’s Friday’s RBI reference rate.
And monthly future’s contract and options monthly because options will be monthly of second last day and futures contract too Both will be finally settled on that day’s RBI reference rate. -Okay. -Understanding it? Then let’s come into more detail about it. So, the option chain is exactly like equity. It is European. This is even cash-settled. Though delivery is based on equity. But cash settles in this so in this if the trade remains till the last moment then there is no worry. You will not get delivery. The difference money will be converted into profit & loss. Let’s talk future for some time. If you see in currency futures then,
Its expiry will come on month-end. We are recording on the 29th then its future expiry would be; let’s see what is the last working day of October. 29th October meaning 2 days before it that is 27th. So, the currency future is expiring on the 27th and there are options of the same day. Let us do one thing. We will only focus on the future’s so currency future and let us look at all the expiry so all these USD-INR contracts are available to you. 27th October, 26th November, 29th December, 27th January, 24th February, 29th March, 29th August you see there are contracts available for 12 months.
This means if you want to bet currency for next year’s September, you can bet. -okay. -You can see a reference rate? -Yes. This is the same RBI reference rate that RBI has updated at 12. So, today’s reference rate is 73.77 So if any contract is getting settled. Then it will settle on this rate. - So, how is this rate different from the spot price? -Very good question. The spot price for bank That changes in real-time because it’s a dynamic market. No one’s controlling it. It’s not so that RBI has said this so it’s a fixed rate based on the fixed regime, NO. RBI has fixed this rate for retail that if anyone wants toke for retail purpose then RBI is saying take this rate. Because for small work, we won’t take rates from Bank.
But for big rate, it is volatile so obviously, this is not a benchmark. It is for small work. You ask questions. The more you ask the more will the concept be cleared? You ask in the comments, I will answer. The more you ask the more concepts will be cleared. If you don’t ask then it’s just a knowledge session going. And Annapurna Ji asks nice questions so you only ask. Then these all contracts are available in future. If you see the spot price was 73.77 Let’s assume it now. And October expiry of future is, if we see the last price then it’s 74.3950 meaning it is till 4 decimal points. Then its tick size is 0.025 meaning per lot there is a profit/loss of 2.5 Meaning in 1 lot a tick of 0.025 is there. O if having a profit of 1 tick then you are getting 2.5 per lot.
So, 74.390 is the last traded price of October. And for November it is 74.63 meaning up by 0.23 from October. Why? Because future will anyways be high. -Why? -Because they are trying to predict that interest rates will go down or up. The interest rate differential between the US & Indian economy clearly says that as Interest rates of the US are down and that of India is above.
Then because of that forward curve will be at a premium because the ROI of the US is low so people will borrow in USD and invest in India. So there will be a demand for USD that’s why it will be strong and India would be weak for the coming 12 months. Like in currency there is a forwards curve, Similar to the interest rates curve which says what the market is assuming the ROI will be in the coming days. -Like I heard that interest rates will increase, so how will this? If the interest rate will increase in the US and India too then no impact came. Both sides increased. If increased in the US and not in India then this differential between both will lessen
But generally, it is not so. If ROI increases in the US then generally increase in India too. Then this forward curve is always premium. This means the rupee remains weakish only. You see if anyone wants to bet rupee after one year then it is saying 77.26 which means the market is saying If everything remains constant then after a year rupee would be 77. This is what the market is predicting. But everything doesn’t remain constant.
It is dynamic. Life is dynamic. Things will change then 77 can happen or might be 72 can be done. But after one year market is saying it would be 77. People say the future cannot be predicted. Only God can do it. I say the market predicts the future because the market has its intelligence but The market always assumes certain things and given those frameworks of assumption future can be predicted. So it is not relevant for us now. The type of trading we are talking about, then if you implement the 8 strategy video then arbitrage, spread trading, jobbing/scalping Pair trading, multi-asset trading which will be at last, options trading, technical trading. In all those frameworks if you see on the point of view from currency Then in this jobbing can be done too. To do that you have to see a small-time period’s chart. 5 mins chart. - As you said track USD, XDR and plan your trade. But then why put other instruments? - Very very nice question! Rest all instruments are for your subconscious mind.
To be successful in the market, 99% of people work with a conscious mind. And 1% of successful people trade in the subconscious mind. And how to do that?? When you will see things continuously then the impact of those will register in your subconscious mind. This is a statement with a lot of weightage and this subconscious mind will be trained on its own. The more you see more instruments Then you will see outliers; Why is this happening? For example, BRENT, Let me remove 15 mins chart and come in weekly because I want you to see the weekly chart and participate in the market for time being. Don’t do daily trading in currency. You can identify big levels and trade only when it’s breaking.
Money will be made. - Preferably on a monthly expiry? -Yes. Watch chart of every week and expiry of monthly or 2-3 months after If your expiry is this and your trade remains open then roll-over in the next month’s expiry. Square up a current month and move it to the next. If you are tracking this BRENT, a type of crude oil. Worldwide people track it more and crude oil has its relevance.
WTI has its own and BRENT has its relevance. When we will record in Crude you will understand. If you are tracking BRENT then it has gone high of so many days Then it will enlighten you that why this is happening? oil increasing and dollar too. Both should be fast together. Generally, it’s the reverse. But oil has its dynamics. Dollar and oil both are different instruments. In this 1+1=2 is not possible. Sometimes both are parallelly moving. Because both have their politics. So if BRENT is increasing then it will enlighten me that something is wrong and why is oil increasing? Then you will study oil. If Oil is increasing then India is the net importer. So for us, it’s good or bad? -Bad. So if the dollar is going up and oil too, then the double impact would come. Then the rupee would get weaker. So I’m more confident so I will play more with rupee weakness. -In that how will it impact the stock market, sir?
If the rupee is getting weak then our second discussion. There are some stocks/companies that have benefits with rupee weakness and some companies face losses. Which ones? -Big companies. -Of what type? Rupee means importer or exporter. So if the rupee will get weak then exporter has a benefit and If it gets strong, then the importer has a benefit. So, if we take out the list of the companies that are net exporters like IT companies So, if the rupee would weaken then IT stocks have a benefit so will take in IT stocks and work. And if the rupee would weak then importers would have a problem Like the ones who import oil, they have problems so I won’t take them and work. So making a list of stock related to currency, commodity
And trading in them based on movement in a currency, the commodity is one of the strategies. Like metal is booming. Copper and all boomed so its impact would come in the metal stocks of India. So the ones dealing in meta will have the benefits too. Why? We will discuss later on why. Because ultimately realizations increase meaning if price increases, then the price of inventory lying increases.
Under rupee, if it gets weaken then how will IT companies are benefitted? IT companies booking their business in dollar terms So if the rupee is weakening then under the rupee terms they earn more because they are getting that much only in dollars. So if the rupee is strong buy IT stocks and vice versa. This is a strategy. More stocks are importing/exporting from IT stocks. You have to work on it. I cannot give you readymade. The whole purpose of this exercise is to get lost. So did you understand? -Yes sir. -So one strategy is you trade USD-INR.
Based on the movement of USD, look at crude oil, euro, and other major to get a view. The more you see the better you will be. Sir what if there is a divergence between the movement of USD-INR and DXY? -It can happen because the USD is saying rupee to get weaken But INR is saying that I will be strong. So a fight took place between the two. So it is not working as it should do What can be the reason for INR? Suppose in India something good happens politically. Modiji again came then INR will increase. People will appreciate it. Because of India’s impact INR is booming. INR wants to go down and due to dollar weakness INR wants to go up then there is a fight between both. It can be divergence and at that time your money won’t be made. Assume it. The second situation in which money won’t be made is when RBI will interfere
The dollar is getting weak outside. Our’s should go up but RBI is doing open market operations then what does RBI do? It knows that it doesn’t want volatility like see it went up and someone sold and again and again which means we can assume that in this range; (RBI doesn’t sell at one price point, it sells in a range) RBI is standing. It won’t let it go above 75.10 So when it will come here we will square up. And when it will give breakout and stay there for some time then you will take it again because it’s not under RBI’s control Means suppose this is a dollar, it is forcing and getting strong and RBI comes to stop and it will have a limit, the force has the power so it will move back And again it will stand from 75 to 76 So how does RBI do the open market operation? the foreign exchange lying with it gets sold So it will sell dollars such that it becomes weak. Or take a dollar such that Rupee isn’t strong. So FOREX reserve becomes a very important medium of doing open market operations
From an RBI perspective. And you can see it technical chart when RBI is coming. -So when I will use indicators are these 3 only fine? I think a moving average of 21-55 is good. You can add RSI. RSI shows its strength that I have taught you RSI and under that people follow 40-60 range You keep a range of 50 If RSI is above 50 then this means it has strong momentum. RSI above 50 and dollar index moving upwards And in moving average 21period is trading above 55 then you work in this with locking it. Using stop-loss and work with taking a profit.
In this the risk-reward ratio? -The standard one 1:2 1:3 depending upon how long you want to carry your position The ones we studied in technicals are the same intact, Only the approach should be different in this. Studying RS from NIFTY And over here you will try to relate the dollar with its movement. so you will track other assets because other assets will subconsciously Prepare you for any kind of outlier movement Anything unique and its impact come in the dollar due to which your stock will react too. So you start to follow. Watch chart. Make a view from Saturday-Saturday For coming days don’t trade, do paper trade
Make a view and you can trade if you want to because 1800-2000 will be used. Start with 1lot. The more early you start, the more confidence you will get. And believe me, if you start trading currency market then other markets will come in your hand. So, you start it. You can do Options too. If you want like you want to participate in Options as there is so less lot size in future that doing in it eve has no botheration. To be used is not much. Volatility is not much but when it comes good money is made. Not trade in this every time.
When there is a chance of breaking volatility than do trade. So in this one more indicator can be used. Bollinger band. The one I had taught you. If you haven’t watched it then will share its link. In this, you can see the Bolinger band too. And from that, you can find out volatility will squeeze or burst. Like there is a range of Bollinger, so this is moving upwards of the mid-range. Both up. So from here, we can play the booming game. -If the dollar is going up then shall I less or cautiously participate in NIFTY/BANK-NIFTY? If the dollar goes up then we have to be conscious because we will be cautiously bullish then you can participate less or make your setup like you have 100,000 So 50,000 will be interested in stocks, whatever be the dollar unless a big reversal is seen. Aand do active trading from 20-30,000 And from 10-15,000 do trading in currency. So allocate your capital accordingly that you are participating in all assets a little bit
And whenever you see a major movement in any asset then you take a corrective measure. Now we have seen currency, commodities are left. Capital requirement for a commodity is a little more because it cannot be done in small capital but should track it. Not necessary you trade but tracking should be done. Because from commodities you can trade in stocks which have an action of the commodity And many times lits vice-versa. So, you can then work in equity and make money. If I take the rest currencies as an example then what’s the general relationship between RSB-USD & USD-INR? Like I said eventually emerging market currencies will behave the same way. If you see not on daily basis but over a while
The chart will be more or less the same and if there is something unusual in anyone’s chart then it means something is happening in that country Whose impact can come on the dollar! So this is to identify outliers like Brazilian currency, Russian, Korean currency You see more or less their structure of the movement and that of USD-INR’s structure of the movement has not much difference. If it happens and India is not doing accordingly then it means there is something India specific. Good or bad due to which USD-INR is not working. That time trade should not be done. When everything seems to be set, then take a position. If any divergence is taking place then avoid it one time.
Or reduce its quantity. When there is more conviction then keep more quantity and vice versa. -As capital is not needed much. So in this? 20k? 30k? 50k? Start with 20k and in a lot 2000 is used. So you can start with 10 lots. -Okay. -So this was a small attempt to teach you currency. It’s an ocean. The more you enter the more you will learn. Could do the most in 2 videos and now you start to practice and if any questions then do comment. I will try to reply conceptually such that you try to watch the currency market. Using small capital, it’s an impactful market. It will benefit if you trade in this. So, if you liked my videos then do share them with friends and in real terms a multi-asset trader
That I want you to become. Join that journey and make your friends join too. Thank you. Bye-bye. Take care.
2021-10-10 21:52
