How To Open A Forex Trading Account – In the early days, only large companies and corporations received foreign funding to support defense objectives. But given the advancement of technology, forex trading has recently opened up to retail traders like you and me not only quietly, but also speculatively.
Trading in the money market is simply buying and selling money. If someone says Eurusd is trading at 1.3500, it means that 1 Euro costs 1.3500 Usd. So if you want long Eurusd. you will buy 1 Euro and sell 1.3500 US dollars.
How To Open A Forex Trading Account
But before you get all the joy of starting forex trading, there are five things you should know before opening your trading account.
Forex Basics: Setting Up An Account
If you buy a stock, you pay a commission and spread on it. The spread is the difference between price and supply. If you want to buy Keppel Corp today and you are quoted $10.10, this is called a premium. And if you want to sell Keppel Corp today and you are quoted $10.00, this is called a bid. So the spread for Keppel Corp is 10 cents.
So for the market you have 2 business expenses to cover, service and marketing.
In forex trading, you only have 1 trade price to close the spread. You don’t get paid anything unless you trade on ECN (that’s another story entirely) And this is why Forex trading has a lower trading cost compared to stock trading.
When you buy stock, you are part owner of the company you buy from. But in forex trading you have nothing, not even the money you buy or sell. Because you are trading in the spot market and do not generate income, unlike the futures market.
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Your broker records all your orders electronically, showing profit & loss based on the current market price. If you make a profit, your equity will be increased accordingly. Likewise, if you sustain a loss, you will be charged an equal amount.
Forex trading is a useful tool. It is not unusual to see a broker offering 1:100 on your capital. This means that if you invest $1000, you can trade up to $100,000. Yes, that’s right, 100 times your profit!
But power is a double-edged sword. It can increase your profit or increase your loss. And that’s why you hear stories of customers hacking their business accounts. They leave limits according to the size of their account, even a small movement for them is enough to cancel their trading expenses.
E.g. SIA is currently trading at $10. You invest $1000 and you can invest up to $100,000. You increase your leverage and buy 10,000 SIA shares. If SIA loses just 10 cents, it will be enough to wipe out your $1000 capital. (0.1 * 10,000 = $1000)
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In forex trading, there is something called carry trading. When you sell well, it means that your long-term investment pays a higher interest rate than your short-term investment. E.g. You are long Audjpy, this means you are buying Aussie and selling Yen. The Aussie currently pays an interest rate of 2.5% per annum and the Yen has an interest rate of 0%.
So what you do is borrow Yen at 0% and put it in an Aussie that pays 2.5% per annum.
This trade is a financial risk that the Aussie can eat more than 2.5% over the Yen, or then you will lose money because a good trade is not enough to cover the big loss.
Unlike stocks or futures that are traded on an exchange, forex is traded on the market. Therefore, there is always a possible opposition to the party’s danger. In your trading business, your counter party risk is always your friend.
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Your transaction fees in the forex market are much lower than the interbank market. So it often happens that your supplier takes over the other side of your business. After that, the trader will combine these orders together and close in the bank market. (interbank market is where banks and companies do business)
If your broker fails in some way and the price is against the network ranking of your broker, it can cause it to fail. An example would be the recent intervention of the SNB which caused traders like FXCM and Alpari to suffer huge losses.
Forex trading may seem attractive at first, but understand that it is very different from investing in traditional markets. It comes with a lot of power and associated risks, but at the same time, it has a low selling price and can get you a good deal.
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How To Start A Forex Trading Account?
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This article was written in collaboration with IG, the world’s No.1 CFD provider (by currency excluding FX, June 2020). All opinions expressed in this article are our own opinions based on our research. is not responsible for any financial loss that may arise from any transaction and readers are encouraged to do their own research. You can check us out
Foreign exchange, also known as Forex or FX, is the practice of buying and selling currencies. Trading is done in two currencies. For example, if we want to buy the US Dollar (USD), we have to back it up with another currency. The main currency should not be our local Singapore dollar. In fact, it is often against other well-used currencies such as the Euro, the Japanese Yen or others.
If we choose to pay in Euro (EUR), this means that we are trading EUR/USD and we expect the USD to appreciate against the EUR. If EUR/USD is trading at 1.20, this means that 1 EUR costs 1.20 USD. If it went down to 1.15, the USD would have appreciated against the EUR and this means that we are making money on our trade. If it goes up to 1.25, this means that the USD is below the USD and we are losing our market.
One important thing to know is that unlike investing in asset classes like stocks, bonds or indices, forex trading is a zero-sum game. In order for one person to make a profit in his work, there must be a loss for another person on the other side of the business. This is unlike other asset classes, where prices can appreciate over time.
How To Start Trading Forex
That said, we must remember that most people who participate in the forex market do not want to make a profit from the exchange. For example, many businessmen and people work when we import goods. We do these trades without the intention of making money from forex conversions.
Another point to note is that, in general, the forex market tends to be very stable in the long term. For example, in the last 5 years, if we look at USD/SGD, it is trading between 1.30 to 1.40, so if you use your SGD to buy and hold money (like USD) over the last 5. years, you won’t make or lose much. In contrast, a stock may gain or lose value during this period.
However, in the short term, there are sometimes changes in two-way money. This allows traders to profit from constant price movements in the forex market even if prices are not changing for a long time. In order to get high returns, many traders are also ruthless. Leverage trading refers to the use of borrowed money to increase the customer’s position. This can increase your return and risk, so it is important to manage your risk properly.
If you want to trade in the forex market, you need a trading account. Although many trading platforms offer something similar (for example, they will allow you to trade two currencies such as EUR / USD, GBP / USD, USD / JPY), there are some things that you should not forget.
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To protect retail customers in Singapore, the Financial Services Agency of Singapore (MAS) has strict regulations. If you are serious about trading Forex in Singapore, it is a smart move
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