With the world becoming increasingly globalized, international markets play a significant role in almost every aspect of our lives. As opposed to the days when most people only traded domestically, we can make investments and trade on all kinds of international markets today. There are tonnes of options available, and one such option is forex trading (also known as FX trading), which involves buying and selling currencies.
Here we will discuss how you can get involved with foreign exchange trading in Singapore.
What is Forex?
Forex or foreign exchange market is the trading of currencies across national borders throughout the world. For example, if someone wanted to work abroad in Switzerland, they would need Swiss Francs to pay for housing, food etc. They would have to buy them on the foreign exchange market to get the Swiss Francs. The idea is that you can trade (buy and sell) foreign currencies so that gains are made from fluctuations in rates.
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For example, you could buy Philippine Pesos for $0.45 and then sell them at $0.46, which gives you a gain of 5 cents per peso or 10% more than what you started with! The main factor that affects changes in currency value is interest rates since high-interest rates attract investors who want to invest their money into countries with higher interest rates. For example, if the US interest rate were much higher than Japan’s, this would attract traders to move their funds out of Japan and into US markets.
The Forex Market
Here are some key terms you need to know before becoming a successful forex trader;
This is the price at which the currency can be bought. For example, if you wanted to buy Australian Dollars, this would be the current price in Singapore Dollars (SGD) that a trader is willing to sell for.
This is the price at which traders can sell a currency. If we take our previous example and we say someone was selling Australian dollars, this would be the amount of SGD they require to complete such a transaction (in other words, how much USD does one Australian dollar cost ? )
This is the difference between the bid price and the asking price.
Forex Trading Platforms
Many forex trading platforms are available these days where traders can buy and sell currencies. These can be desktop applications, mobile applications or even web-based apps. Some of the most common ones include:
MetaTrader 4 (MT4)
This platform for professional forex traders offers tools to help with technical analysis, including automated trading. One major drawback is that it doesn’t allow you to deposit money directly into your account; instead, you need to make use of an outside payment provider such as Skrill. This means that if you want to trade on MT4, you would first have to deposit money into your Skrill account then use it to fund the MT4 platform.
This web-based trading platform offers over 30 currency pairs and allows you to make trades through credit card or bank transfer. One significant benefit of AvaTrade is the very low spreads (costs involved in trading). They do, however, charge a commission based on each transaction made, which can add up quickly. The minimum amount required to start an account with them is $100 (USD) or equivalent.
These are platforms where traders buy and sell currencies directly, such as Oanda. The significant benefit of dealer markets is no commissions charged, so you keep all the money you make. One downside, however, is that spread sizes are much bigger, which means you have to trade larger lots if you want to make any returns.
Trading forex in Singapore can be rewarding and exciting. New traders are advised to use a reputable online broker from Saxo Bank before starting their investment journey. For more information on Saxo Bank brokers, visit the site here.