Forex Trading in Macao

Macao (also spelled “Macau”) is known as a haven for gamblers, so its population may be more accepting of speculative forex trading than those living in other Asian countries. If you are interested in taking an educated gamble on foreign exchange rate movements from Macao, you can get started now trading forex via financial instituions that will accept you as a client. 

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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.

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The Monetary Authority of Macao (MAM) oversees the financial, monetary, forex and insurance markets in Macao with the goal of ensuring their smooth operation and supervising those operating within them based on established and relevant regulatory statutes. The MAM also monitors the internal monetary stability and the external solvency of its local currency, the Macanese pataca (code MOP, symbol MOP$), which is pegged to the Hong Kong dollar at the rate of 1 HKD to 1.03 MOP.

Get Started with Forex in Macao

Macao does have relatively tight financial regulation, although The MAM places no maximum ceiling on the amount of leverage you can use when trading foreign currencies. This tends to attract risk-tolerant currency traders and the online brokers that cater to them. You can use the following to start your foreign exchange trading journey.

1. Internet connection: You will likely need a decent internet connection in Macao to ensure you have enough bandwidth to use the trading platform, online tools, apps and browser pages you need to keep open when accessing the foreign exchange market.
2. The broker: Macao is a haven for offshore businesses, but you will probably want to select a major international online forex broker rather than one based locally. Make sure that any broker you choose is well-regulated through a reputable financial authority, such as the UK Financial Conduct Authority (FCA) or the U.S. Securities and Exchange Commission (SEC).
3. Trading account: Most online brokers offer several account types you can use to trade forex on margin. Review the requirements and benefits of each before choosing one you qualify for and that suits your trading needs best. 
4. Account funding: You can generally fund your trading account via a bank transfer, a debit card or an electronic payment processing company like PayPal or Skrill. Individual investors should create a budget to help manage their funds.
5. Trading platform: Many online forex brokers offer their proprietary trading platform for clients to use and they usually allow traders to use popular 3rd-party platforms. You should select a platform you feel comfortable using, that offers you quick deal execution and that has all the analysis features you require to inform your trading. 
6. First trade: With a reputable broker, the right account type and an intuitive trading platform, you are ready to make your first trades in the forex market. Currency prices are volatile, but economic growth often dictates that values will rise. As a result, you can start small and progress slowly as you build a portfolio.

Macanese Forex Trading Strategies

Learning how to trade forex profitably can depend on the type of personality you have. If you’re patient and good at long-term forecasting then there is a strategy type that may suit you best. If you are antsy and prefer to take short-term risks, then you also have a suitable strategy type — and so does everyone in-between. Use the following strategy-type descriptions to start exploring your options.

The Day Trader

Day traders move in and out of the market throughout the trading “day” or session. Since the forex market remains open 24 hours during the trading week, day traders generally pick a particular session to trade in, such as the New York, London or Tokyo sessions. The day trader is generally distinguished by the closing out of all positions by the end of any session. This lets the day trader avoid the so-called “overnight risk” involved in holding positions during other trading sessions when they cannot be actively watching the market. Day traders often trade based on technical analysis, including chart patterns and indicators, although they also need to be aware of pending news announcements that could affect the forex market. 

The Swing Trader

Swing or momentum traders typically aim to capture more of the market’s overall volatility by using momentum technical indicators to signal when markets are ripe for a reversal. The swing trader may hold a trade for hours or weeks depending on their gameplan. Swing traders typically watch their preferred technical indicators closely, but they also keep aware of relevant news and economic developments that can affect the forex market. 

The Position Trader

The position or trend trader generally waits patiently for sound opportunities to take advantage of long-term trends in the exchange rate of a currency pair. The position trader might examine the fundamental economic differences between the issuing countries of two currencies and how their relative valuation or exchange rate could change in the future because of political and financial conditions or trends. While the day trader may look for short-term news or chart patterns that can affect the exchange rate of a currency pair, this trader tends to look for a long-term trend regardless of the currency pair’s volatility. A position trader may hold a single trade for months or years in some cases, depending on the duration of the long-term trend in the currency pair.

Forex Trading Example in Macao

Since most forex traders in Macao will want to operate in the major currency pairs rather than in pairs involving the MOP, consider an example involving EUR/USD. 

If the EUR/USD bid/ask quote is currently 1.1410/1.1415 at your broker, you can place an order to buy €40,000 against the U.S. dollar to take advantage of an expected short-term rise in the EUR/USD exchange rate. Your broker allows you to use a leverage ratio of 30:1, so that will require a margin deposit of at least €1,333.33 in your trading account to hold that position. 

At the end of the trading session, the EUR/USD bid/ask exchange rate is 1.1470/1.1475. The market has moved up by 55 pips. You earn (€40,000 x 0.0055) or $220. Had the market instead fallen by 55 pips when you closed the position out, you would have taken a loss of $220. 

Making Money with Forex in Macao

If you have chosen a strategy for trading, you can broaden your trading horizon by understanding the terms below. 

• Going short: Net selling a currency pair to take a view that its exchange rate will decline. In forex trading, you always go short or sell one currency against another that you buy or go long. If you start with a neutral position in EUR/USD and then “go short” the EUR/USD currency pair, you sell the EU’s euro and buy the U.S. dollar. On the other hand, if you instead were to “go long” the EUR/USD pair, you would buy the EU euro and sell the U.S. dollar. 
• CFDs: The use of contracts for difference, or CFDs, allows traders to take a position in a currency pair via a contract without taking an actual position in the underlying currency market. The exchange rate of a CFD on a currency pair will mirror that of the pair’s spot exchange rate activity in the forex market.
• Binary options: Exotic derivatives that give the holder a fixed monetary payout when a certain market condition is met prior to or at expiration in return for a fixed upfront premium. Most of the time when trading binaries on currency pairs, you will simply choose whether a currency pair’s exchange rate will be above or below a certain level on a certain date. Choosing correctly means you get the predetermined payout. Choosing incorrectly means you are out the premium you paid to buy the binary. 

Best Online Forex Brokers in Macao

You have a choice of many foreign online forex brokers who will accept clients residing in Macao. Make sure you check that they are overseen by a reputable regulatory authority.

Forex Terminology

Having a strong grasp of forex terminology can be helpful when you are planning to start trading currencies. Here are a few terms you should familiarize yourself with.

• Pip: The minimum exchange rate movement for a particular currency pair, usually 0.0001 for most pairs. 
• Lot size: A standard trading amount. Online forex brokers typically define a standard lot as 100,000 base currency units. 
• Orders: Instructions containing the details of your trade given to your broker to execute transactions for you. 
• Calls: Option contracts that traders can buy to obtain the right to purchase one currency against another at a given exchange rate on or before a future date.

Trading Forex is More like Gambling than Investing

Chinese President Xi Jinping has put numerous policies in place to do more business in Macao and less in Hong Kong. Macao will certainly depend much less on gaming and may develop further as a legitimate financial center. The infrastructure is there. Traders should keep a close watch on the relationship between China and Macao in the near future, although they can get started trading forex now using an online broker.

There is other news affecting the forex markets that you should know about if you want to get involved in trading currencies. Bookmark our website and visit often to keep up with the information that can enhance your profitability.