Put simply, forex or the foreign exchange is a global marketplace for exchanging national currencies. Forex markets are considered to be one of the largest and most liquid asset markets out there.
Currency exchange has been around for centuries but the forex market is a fairly modern invention. Prior to the roll out of the world wide web, trading was far more difficult and was therefore mostly reserved for hedge funds, large multinational organisations, or high-net-worth individuals that had huge sums of capital.
One of the benefits of trading in forex is that the markets are open 24 hours a day, starting in Australia and ending in New York, due to time zones. Major worldwide centres include London, Frankfurt, Zurich, Paris and Sydney, with Singapore, Hong Kong and Tokyo being the hotspots for forex in Asia.
Different countries have different rules concerning the legality of forex trading, the tax implications and the regulatory requirements.
For example, in Malaysia, forex trading is legal in recognised and regulated financial institutions. There are questions around whether the law pertains to actual money and whether it is inclusive of online forex trading, which is very popular today.
Investing abroad is allowed in Malaysia and the authorities do supervise activities and hold those who break the rules, such as trading with someone else’s capital, accountable for their illegal actions.
There is lots of interest in forex in Malaysia, with one of the most popular questions asked by people in this country, interested in trading, being is forex trading taxable in Malaysia?
The income that an individual makes from the forex market is taxable in Malaysia as income tax, but forex capital gains are tax exempt.
Therefore, if you trade with an Islamic account and are seen to not be deriving an income from your trading activity, then you will find that any gains should be tax-free
Similarly in Singapore, forex trading is popular. This is unsurprising given the fact that the country has the third highest GDP per capita in the world.
The government in Singapore does not impose any significant restrictions on forex trading in the country and the Singapore Exchange is in fact currently the biggest exchange in the whole of South East Asia.
All profit for individuals trading in forex is tax free in Singapore, however if someone is considered to be a full time investor, then they are subject to paying tax. For those wanting to know the specific rules around tax in and legalities in their location, a professional advisor is usually recommended.
How to get started in forex trading in Asia
Choosing a broker and platform
Starting out in forex trading can be a little overwhelming as there are a number of decisions that must be made and plenty of new terms to memorise. One of the first steps should be to select a broker platform.
A broker may be selected based on what they offer, who they are regulated by and the spread that is on offer. You are likely to want to find a platform that has tools such as world news, real-time charts and technical analysis tools integrated into the site.
What to avoid
You need to be sure to avoid being involved in the premature buying or selling of a currency near to preset points. This is known as sniping and hunting and is an inappropriate method that is sometimes used in an attempt to boost profits.
Choose an analysis method
You are going to need to grow your understanding of different methods of forex analysis and make a decision on which you intend to use. This will help you to determine the best times to enter and exit the forex market.
Fundamental analysis is known to be one of the more complex methods of analysis used by forex traders. With this technique, certain indicators are used to spot longer term trends and the information and be found and interpreted from certain publicly accessible reports.
Rather than this, many traders will favour technical analysis. Technical analysis can include Elliott Waves, Fibonacci Studies, Pivot Points and Parabolic SAR.
Usually a number of these methods are combined as part of the analysis to ensure the most accurate predictions can be made.
Start with a demo account
When new to the world of forex trading, it is always wise to start with a demo account and get to grips with trading and the platform you want to use before you begin to trade in actual currency. You also need to ensure that you are trading without emotion and not making rash decisions within the moment.
Develop your strategy
As you better your understanding of forex, you can start to build your own tailored forex trading strategy for success. This is often achieved through trial and error and seeking advice from experienced traders.
Forex trading is becoming increasingly popular across Asia and benefits from being tax free in some locations. If you are planning to trade in currencies within Asia, ensure that you are completely aware of local rules and regulations with the advice out there.