If you have a good forex trading plan, you can gain more during the short run. Often, the traders had to put up with a loss because, they are not aware of the recent developments in the market. Consider the following transaction processes.
Sale transaction covered by purchases: Here no shares are delivered for settlement. Consider, that you have sold 100 ITC shares on Day 1 of the settlement cycle at Rs.100 for a total value of Rs.80,000. On Day 7, you purchased 100 shares of ITC at Rs.790 for a total value of Rs.79,000. You will receive the difference between the sale and the purchase price of the share. This can also work the other way around. You can purchase on Day 1 and sell on Day 7 and take the difference.
Purchase of shares covered by the sale proceeds of shares or switching: You sold 100 ITC shares on Day 1 of the settlement cycle at Rs.800 for a total value of Rs.80,000. You intend to purchase shares of Corporation Bank, which is trading at Rs.400. You can purchase 200 shares of Corporation Bank within the settlement cycle without having to pay for your purchase. The sale proceeds of ITC shares will be adjusted towards the purchase of shares of Corporation Bank. However, if there is any difference, you will have to either receive or pay for the same.
The settlement in the book entry sub-segment is conducted on a Delivery-versus-Payment (DVP) basis on the next Tuesday. The settlement is completed within 8 days of the last day of the trading cycle. Most of the Foreign Institutional Investors (FIIs), do have a daily investment plan. This is the main reason for the phenomenal revenue and profits generated by these firms.
In the forex market, as in the share market, the market forces of demand and supply determine the profits and losses for an investor. To plan properly, a trader must be thorough with the various developments in the financial market and the variations that can take place due to outside influences.