As the biggest market in the world, the forex market has a lot of activity every day which attracts many people to trade forex daily. In fact, the average daily volume of trading can reach up to $6.6 trillion. Due to the volatility of the market, it’s easy to see why people love to trade forex every day. You can trade forex from all around the world, but there are many reasons to trade forex in Singapore. Below we will discuss exactly what forex trading is, and why you should trade forex in Singapore.
What is forex trading?
Before you learn about the advantages of trading forex in Singapore, it’s a good idea to have a basic understanding of forex trading. Essentially, forex trading involves trading one currency with another, with the aim of making a profit from the trade. The value of different currencies varies throughout the day and is affected by a number of factors. News in the market about the economy of certain countries can heavily influence the value of currencies, as well as geopolitical factors.
One of the unique components of the forex market is that it is open at all times of the day, every day. This attracts a lot of people to trading in the forex market as they can trade at any time during the day, and even at weekends. Trading currency is a lot more convenient for traders due to the high liquidity and the fact that the market is always open.
How does forex trading work?
To put it simply, forex trading works by investing in a currency at a certain price with the hopes of accurately predicting how the price will change in order to make a profit. Trading of currency in forex trading usually involves trading what is known as pairs of currencies. An example of this is the USD/EUR pair. When purchasing a USD/EUR currency pair, you are betting on the USD going up in price versus the price of the euro. Traders can predict the movement of the value of a currency based on geopolitical news and technical analysis.
You can make trades and bet on the price of a currency going up as well as going down. If a trader is predicting the value of a currency going down, then they would take a short position. If the trader accurately predicts that the price goes down they will make a profit in the short position.
#1 Forex trading is fast-moving
Forex trading is very fast-moving due to the high volatility of the market. Forex traders tend to only hold their position for a short period of time as the market can change very quickly. Once a forex trader has achieved a profit with their trade, they usually close the position to avoid the market changing again. Forex traders don’t tend to hold on to a position if it seems like it’s going the wrong way.
For those that want to trade in a market that requires a lot of attention on quick movements, the forex market is very appealing. Good opportunities for trades are a lot more common in the forex market, but a trader needs to be able to recognize when to get out of a good position and cash out.
#2 You can start trading with little capital
One of the good things about the forex market is that you don’t need a lot of capital to start trading. You can get started with a small amount of capital and build up from there. Unlike other forms of investment, you don’t need a lot of savings to get started. With respect to investing in popular stocks, you will need significant capital to buy just one stock. With forex, the amount of capital you invest in your trades is entirely up to you, and entry-level capital is relatively low.
#3 Trades may be on high leverage
Another attractive feature of the trading in the forex market is the ability to use leverage to increase your position on trade. This essentially means that with a small amount of capital you can leverage your position so that you have the potential to make a lot more profit on a single trade with only a small amount of capital.
For some trades, you can enter a trade with a leverage of x50 which means that with a $10 trade you can hold a position with $500. This significantly increases the amount of profit a trader can make in a single trade, which is a big factor in attracting a lot of traders to the forex market.
#4 Tax-free Singapore
One of the main reasons why many people opt to trade forex in Singapore is due to the legislation around taxes with respect to forex trading. Essentially, all capital gains earned from forex market trading are tax-free, as long as you don’t quit your normal job to become a full-time forex trader. Another reason why people prefer to trade forex in Singapore is the fact that overseas income coming into a bank in Singapore is not affected by tax laws.
This means that if you’re a forex trader from a country other than Singapore and your profit is coming into a Singapore bank, you won’t be subject to Singapore’s tax laws.
#5 You don’t usually own the underlying assets
In respect of forex trading in Singapore, when you make a trade you own the position but don’t usually own the underlying assets. This means that the losses and profits are attributed to you, but you never actually own the currencies you make trades with.
