Non-Deliverable Forwards (NDFs) are a popular financial instrument in the currency market, especially in regions where forex trading is restricted. In this guide, we will explore the concept of NDF trading , its benefits, and a step-by-step process to get started. What Are NDFs? Non-Deliverable Forwards, or NDFs, are financial derivatives that enable traders to profit from fluctuations in currency values. In an NDF contract, two parties agree to exchange the difference in currency value at a future date. Settlements are made in cash rather than through physical delivery of the currencies. These contracts typically have time frames ranging from one month to one year. What Is NDF Trading? NDF trading involves buying and selling NDF contracts to capitalize on currency exchange rate fluctuations without owning the underlying currency. Here’s how it works: Two parties agree on a notional amount and an exchange rate (the forward rate). At the settlement date, the difference between the agre...
A Comprehensive Guide to Trading Non-Deliverable Forwards (NDFs)