Says Kishore Narne, associate director, head-commodity & currency, Motilal Oswal Commodity:“Forwards lock the time along with the price. This closes the option to exit the contract in between if needed.” Naveen Mathur, associate director–commodities & currencies, Angel Broking says, “In case of futures, standardisation helps to create liquidity in the market and clearing house guarantees against default risk.” This is the reason why you should be using currency futures. Futures closely resemble forwards except that futures contracts are marked to market (MTM) at the end of the day and one can exit the contract any time before it expires. The biggest advantage with futures is the minimum investment needed. Currency futures margins range anywhere between 3 and 5 per cent, which means even students and travellers, can consider the same given the small size of the contract. For instance, 1 USDINR contract has a unit of 1,000 USD. Transaction impact cost is also very low. The best part is that you can be assured of the best prices and the price quoted would be the same across participants. “In currency futures, price discovery happens within a larger market whereas in the case of forwards, it is a contract between two parties at a negotiated rate which can vary from bank to bank,” says Vikas Vaid, product head-commodity & currency at Prabhudas Lilladher. In comparison, banks quote exchange rates based on various parameters and would differ from one customer to another and lack transparency. The bigger the amount you deploy the better would be the rate (lesser the premium) offered by banks. This is totally ruled out in case of the currency futures market where price is a function of demand and supply. Add to this, high liquidity that would allow easy entry to and exit from the market. Things are even better now that foreign institutional investors can participate. Do remember that even though currency futures are highly useful, they entail great risks too. So what should be your strategy? Mathur suggests selling MCXSX or NSE USDINR around Rs. 62.50-Rs. 62.60, stop loss – Rs. 63.50, target –Rs. 61.00/ Rs. 60.80.