Forex Trading in Mongolia

Located in north central Asia, Mongolia borders Russia to the north and China to the south. After the fall of the Soviet Union in the 1990s, the Mongolian economy suffered a series of economic crises from the mid-’90s to the 2000s due to its former dependence on the Soviet Union as it transformed from a command economy to a market economy. 

The Financial Regulatory Commission (FRC) and Bank of Mongolia (Mongol Bank), the country’s central bank, both regulate the forex market in Mongolia. In February 2019, the government of Mongolia launched its one-stop service center to stimulate foreign investment. The center provides information on Mongolia’s legal framework, social insurance and other foreign investors’ obligations, as well as taxes, visas and corporate incentives.  

While Mongolia has yet to attract a major international investment bank, a number of regional Asian banks operate in this historically nomadic country. The Mongolian forex market has seen a boost in interest and activity since 2019, with several forex brokers now based in Ulaanbaatar, although most traders in Mongolia will want to use a well-regulated foreign broker instead. 

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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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Get Started with Forex in Mongolia

To set yourself up as a retail forex trader, you should complete the steps outlined below before you can begin to operate in the forex market. 

1. Connect to the web.  To trade the forex market successfully, having a fast, reliable internet connection is important. Most currency traders in Mongolia will want to use a foreign online broker, which makes internet access essential. If you’re planning on trading from Mongolia, make sure you do so in a major city where the internet is much more accessible. 
2. Get a fully regulated broker.  In Mongolia, local forex brokers are regulated through the Financial Regulatory Commission and the Bank of Mongolia. If you decide on a broker based elsewhere, as most traders probably will, make sure they are duly regulated by a major agency in their local jurisdiction.
3. Open a trading account.  Once you’ve found a reliable online broker, you can open a trading account that best suits your initial deposit and trading requirements. Most brokers also let you assess their trading platform via a demo account, which would let you practice your trading without committing funds. After you test and feel comfortable with a platform, you can then open a live account. 
4. Fund your account.  To fund a live forex trading account, you can use a number of methods depending on the broker’s preferences. Most online forex brokers accept bank wire transfers, debit card payments and electronic payments from services like Skrill or PayPal.  
5. Choose your trading platform.  Online forex brokers typically offer either their own proprietary trading platform or a popular 3rd-party platform such as MetaTrader or NinjaTrader. Make sure the platform you choose provides you the ability to access the forex market when you need to and on devices that you’re most comfortable using to execute your trades.
6. Make your first trade. After you’ve completed all of the steps outlined above, you are now ready to make your forex trade.

Mongolia Forex Trading Strategies

There are several standard trading strategy types available to the forex trader. Each one has its own benefits and drawbacks. Part of becoming successful in forex trading is understanding which of these strategy types will work best given your personality. 

Day Trading

The chief feature of the day trader is that they close out all positions before the end of the day or trading session. Since the forex market trades 24 hours during the business week, the “day” generally means the New York, London or Tokyo forex trading sessions. Day traders typically stay focused on short-term chart patterns and fundamental risk events, such as news releases pertaining to the currency pairs they’re trading, instead of looking at the larger macroeconomic events underlying market conditions and trends. 

Swing Trading

Finding pricing patterns — swings — within the forex market is how the swing or momentum trader aims to earn profits. Swing traders generally rely on technical analysis, and momentum indicators in particular, to determine whether the exchange rate of a currency pair will go up or down in the future. Swing trading is considered a medium-term trading strategy that requires the investor to be patient and take overnight positions because a “swing” can sometimes take an extended period of time to complete. Often traders will need to wait a few days or even a few weeks to fully exploit the swing. 

Position Trading

Position or trend trading typically requires that the trader understand how certain political and economic events will affect the forex market. Elections, trade wars, natural disasters and political unrest are the types of occurrences that the positional trader looks to leverage by positioning themselves strategically in the forex market. However, because the future impact of a political or economic occurrence may not be immediately reflected in the market, traders using this strategy may need to hold their positions for extended periods of time before closing them out, and they often use trailing stops to protect accrued profits.

Forex Trading Example in Mongolia

The tugrik or tögrög (code MNT, symbol ₮), the national currency of Mongolia, has seen a notable decline against the U.S. dollar in recent years, losing more than 30% of its value relative to the dollar since 2016. Since most online forex brokers do not support trading in the Mongolian tugrik, retail forex traders will typically focus on trading the highly liquid currencies of major nations and trading blocs, such as the EUR/USD pair.  

As an example, when EUR/USD is currently trading at 1.1315, that means that it will cost you 1.1315 U.S. dollars to buy 1 euro. If you think the exchange rate of that pair will rise, you can purchase 100,000 euros on margin through your online forex broker. If your broker allows you to use a leverage ratio of 100 to 1, then that will require a minimum deposit of 1,000 euros in your trading account.

If the exchange rate of EUR/USD has risen to 1.1785 after 1 month, then you can sell your 100,000 euro position to net a profit of 470 pips or $4,700 over that time period. If the market instead fell by 470 pips to 1.0845, you would have lost $4,700 if your broker did not close out your position automatically for lack of margin.

Making Money with Forex in Mongolia

It’s always good to learn the basics of forex trading and the available trading products you can use to trade currencies. Once you are comfortable with those, you can begin to try more sophisticated trading techniques.

• Going short: Shorting is a technique used by traders when they think that the exchange rate of a currency pair will decline in the future. If the pair’s exchange rate drops, the trader can buy the pair back at the lower exchange rate. The larger the difference is between the exchange rate they went short at and the buyback rate, the greater the profit for the trader. 
• CFDs: Forex traders use CFDs — contracts for difference — to trade a currency pair without actually taking a position in the underlying currencies. Forex CFDs are agreements that stipulate that a cash payment will be made by one side to the other equal to the difference between the initial exchange rate of the contract and the current exchange rate of the underlying currency pair. CFDs can also be used to trade a wider variety of markets, including stocks, indexes and commodities.
• Binary options: Exotic derivatives that allow the holder to pay a fixed premium to receive a fixed payout if a specified market condition occurs on or before expiration.

Best Online Forex Brokers in Mongolia

Choose between a number of reputable forex brokers currently licensed by the Financial Regulatory Commission or duly regulated in their local jurisdictions.

Forex Terminology

If you want to become a forex trader, become familiar with these terms.

• Pip: Changes in currency pair’s exchange rate are measured in pips, which stands for “percentage in point” and is the minimum amount by which an exchange rate can move; 1 pip equals 0.0001 for most currency pairs.
• Lot size: A standard trading size. For currency pairs, the standard lot size is 100,000 base currency units, but mini-lots of 10,000 units and micro-lots of 1,000 units are also often available at online brokers.
• Orders: Instructions given to your broker to execute transactions on your behalf, usually entered via your trading platform. There are various order types you can use when trading currencies, including market and limit orders.
• Calls: A call option is a contract, which provides its holder with the right, but not the obligation, to purchase an asset at a specific price (the strike price) at or before the contract’s expiration date. For this right, the call buyer pays what is known as a premium to the call seller. If the price of the asset moves above the strike price, the call buyer can exercise the option and may show a profit if the market ends up beyond the strike price plus the premium paid for the option. If the buyer does not exercise their purchased call option prior to the expiration date, the contract loses all value.  An option that grants the right to sell is known as a put option. 

Is Trading Forex From Mongolia for You?

Given the impressive economic strides that Mongolia has taken in recent years, this nation offers substantial growth opportunities. With an abundance of copper, gold, coal and other mineral deposits that rival major nations, Mongolia’s natural resources create a strong foundation to continue an economic climb. The steady depreciation of its currency also suggests that holding other currencies may make more sense. 

Also, as Mongolians accumulate more capital that they can place at risk, forex trading might make sense for those willing to put the necessary time and effort into formulating a successful trading plan. Bookmark this page and website as your primary source for information related to forex trading.