Forex Trading in Bahrain

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Contributor, Benzinga
December 13, 2022

Bahrainis have been able to trade in the forex market since 2011 when Bahrain initially allowed online forex trading. As currency trading has grown in popularity in Bahrain, more forex brokers are now accepting clients from the country. Many also offer Islamic accounts and interest-free trading for Muslims who wish to comply with Sharia law.

If you’ve decided to trade forex from Bahrain, your first step would be to find a dependable online forex broker. Before you start trading with real money, ensure that you’ve either developed a viable trading strategy or are using a social trading platform so that you can copy a successful trader’s transactions into your forex trading account. 

Disclosure: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Get Started with Forex in Bahrain

It's relatively easy to start trading forex in Bahrain. Just follow the steps listed below to open a trading account so you can trade forex online:

  1. Get a modern device like a smartphone, computer or tablet that can connect to the internet. 
  2. Find out which online forex brokers accept clients from Bahrain. 
  3. Apply and open a margin account with your preferred broker. 
  4. Make an initial deposit in that account via a payment method accepted by the broker. 
  5. Download the broker’s proprietary trading platform or a trading platform that the broker supports. 
  6. Place an order to make your first trade. 

Once you’ve completed these initial steps, you’ll have a funded trading account with an online forex broker so that you can begin trading in the forex market from Bahrain. 

Bahrain Forex Trading Strategies

After completing the steps above, your next step would be to develop a profitable trading strategy that you can incorporate into an overall trading plan. The type of strategy you decide on will reflect your level of experience, your personality and the amount of time you have to devote to trading. 

Forex traders use one or more of several time-proven strategies that have yielded positive results for many people. They tend to fall into the following 5 categories: 

Trend trading: This strategy involves identifying a long-term direction in exchange rates and establishing a position to profit from the move. Following these extended directional movements means the trader often takes positions overnight that they ultimately liquidate at the end of the trend.  

Day trading: Day traders limit all of their transactions to a single trading session, so they liquidate all positions at the end of the day. Since the forex market stays open 24 hours a day from Sunday evening to Friday evening EST, day traders need to select a particular trading session to operate in. Closing out positions before the session ends allows them to avoid the added risk of holding positions overnight. 

Swing trading: Swing traders take advantage of exchange rate moves using momentum technical indicators to signal when to initiate positions. Since the strategy lacks time constraints, swing traders sometimes take overnight positions.

Scalping: The goal of using this short-term trading strategy is to profit from short-term market fluctuations. A scalper enters and exits the market repeatedly to capture profits a few pips at a time. 

News trading: A news trader observes the economic calendar and geopolitical news for important events that stimulate volatility in the market they can take advantage of.

Forex Trading Example in Bahrain

Bahrain’s national currency is the Bahraini dinar (BHD) with the symbol BD and the Arabic symbol .د. The dinar is further divided into 1,000 fils and issued by the Central Bank of Bahrain (CBB).  Imagine that the Bahrain dinar has been pegged to the International Monetary Fund’s (IMF) special drawing rights at a rate of 0.376 dinar to 1 U.S. dollar since 1980.  

Since the Bahraini dinar has a firm peg against the U.S. dollar, the currency’s turnover in the forex market was only $2 billion in April 2019, according to the Bank for International Settlements (BIS). To put that amount into perspective, the U.S. dollar had a turnover of over $1.37 trillion in the same period.  

Since the Bahraini dinar is pegged to the dollar, a rather tight trading range of 0.376–0.379 was observed over the last year, as the chart in the previous section shows. A recent quote for the USD/BHD exchange rate was 0.377 Bahraini dinar to 1 U.S. dollar, which is closer to the bottom of that range. 

To take advantage of this ranging market, you could purchase 100,000 U.S. dollars versus the Bahraini dinar at the current 0.377 exchange rate thinking the USD/BHD exchange rate will rise. If it then increased to 0.379, you could calculate your trading profits shown below:

100,000 USD x (0.379 - 0.377 BHD/USD) = 200 BHD

To subsequently convert that sum of Bahraini dinar profit to U.S. dollars, you could perform the following calculation: 

200 BHD ÷ 0.379 BHD/USD = 527.70 USD

Alternatively, if the USD/BHD exchange rate instead declined to 0.376, then you could compute your trading loss as follows:

100,000 USD x (0.376-0.377 BHD/USD) = -100 BHD

You could then convert that loss into U.S. dollars at the USD/BHD exchange rate of 0.376 as follows:

-100 BHD ÷ 0.376 BHD/USD = -265.96 USD

Making Money with Forex in Bahrain

To make money trading forex over time from Bahrain — or from anywhere else for that matter — you will want to develop a viable trading plan. In general, your plan should include a profitable trading strategy, position sizing guidelines and a money management component to increase your chances of success.

Brokers that accept clients from Bahrain allow traders to leverage positions by as much as 500:1, so you can control large forex positions with a relatively small amount of money. Be aware that leverage can be a double-edged sword since losses are magnified as much as profits. 

Even though developing a trading plan entails some work, the rewards of having a good plan you can stick to can make that effort very worthwhile. Alternatively, you could copy another successful trader’s transactions via a social trading network. Keep in mind that whatever strategy you develop may yield diminishing results over time because of constantly changing market conditions. 

Best Online Forex Brokers in Bahrain

Bahraini residents have a wide selection of brokers regulated in other jurisdictions that will accept them as clients. The CBB recommends that you choose a Tier 1 regulated broker that has oversight from a major regulating organization such as the UK Financial Conduct Authority (FCA), the Australian Securities and Investment Commission (ASIC) or an EU-based broker operating under the EU’s Markets in Financial Directive II (MiFID II) regulations.  

Many top brokers provide a broad range of educational resources that you can access online. The list of well-regulated forex brokers below can help you choose the best online broker available to Bahraini traders based on your individual needs. 

  • securely through AvaTrade's website
    securely through AvaTrade's website
    Best For:
    Non US Forex Trading
    Rating:
    Read Review
  • securely through eToro Forex's website
    securely through eToro Forex's website
    Best For:
    Demo Accounts
    Rating:
    Read Review

    CFD trading is not available to U.S. users. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

  • securely through Forex.com's website
    securely through Forex.com's website
    Best For:
    Forex Trading in and Outside the U.S.
    Rating:
    Read Review

    CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

  • securely through IG Markets's website
    securely through IG Markets's website
    Best For:
    Forex Execution
    Rating:
    Read Review

    For USA residents: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. Be advised that CFDs are not available in the U.S. from this provider. 

    Outside of the USA: CFDs are complex instruments. 70% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

  • securely through HotForex's website
    securely through HotForex's website
    Best For:
    Investing in CFDs
    Rating:
    Read Review
  • Best For:
    Customer Service
    Rating:

    Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.6% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

  • securely through FXTM Review's website
    securely through FXTM Review's website
    Best For:
    Copy Traders
    Rating:
    Read Review

Is Trading Forex from Bahrain for You?

To achieve success as a forex trader, you’ll need knowledge of the market, a profitable trading plan with a viable strategy and the discipline to follow your plan. If you can meet all of these requirements, you have a much better chance of becoming a successful forex trader. 

When selecting a broker, make sure that the broker has oversight from a major financial regulator like the agencies cited above. Start out by reviewing our recommended brokers to begin trading in the forex market from Bahrain today. 

Q

Is it legal to trade forex in Baharin?

A

I became legal to trade forex in Bahrain in 2011.

Q

Is it safe to trade forex in Bahrain?

A

As long as you use a liscensed broker, it is safe to trade forex in Bahrain.

Q

Where can I find a liscensed forex broker in Bahrain?

A

You can find a liscensed forex broker in Bahrain on the list above.

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