The Singapore dollar has faced pressure under a shaky COVID-19 economy. Despite this, it is the 14th most common currency traded around the world. Whether you want to invest in it or move away from it, the forex market is an easy and fast way to move your currency holdings.
With $6 trillion per day traded in forex, you have a practically infinite number of opportunities to make money. Forex is known for being the most liquid trading market, so you can easily move in and out of your chosen investments with no trouble. Here we will talk about how to trade forex using the Singapore dollar as your baseline.
Get Started with Forex in Singapore
Getting involved with the forex market is easier than ever. Follow the steps below to get up and running with your own forex investment account.
- Get online. You can invest in forex using virtually any device that you’d use to watch videos or connect to your bank. The more screen space, the better. As you gain sophistication in your trading, you will take in more information at once. The charts, news and analysis you’ll need are easier to see on a desktop than on a smartphone!
- Pick a forex broker. With more forex brokers available than ever, you will need to research the feature sets before making a final decision. Make sure you have a broker that works well in your municipality — server location makes a difference.
- Open an account. The broker you choose will take you through the steps to identify yourself and connect your bank account.
- Add funds. We recommend trading with a virtual account first. When you’re ready to use real money, most people use a connected bank account. Your broker may also allow checks and other forms of transfer, though they are not as flexible or fast.
- Choose the trading platform. Your broker may or may not have its own proprietary trading platform. This is the user interface you will actually use to make investments.
- Trade. Your setup is complete. You are now ready to execute your investments. Learn about the best time to trade forex so you can optimize your efforts.
Singapore Forex Trading Strategies
If you want to trade forex successfully, you will need to master some basic strategies:
Price action trading: Price action involves studying the historical movement of price. Using this information, you can identify possible entry and exit points for investments. This trading style is usually meant for short-term moves of less than 1 week. Trend identification, momentum indicators and support and resistance levels are important terms to learn.
Trend trading: If a market has a definite direction, you can take advantage of trend trading. An uptrend is a market achieving higher highs and higher lows on pullbacks. A downtrend is moving through lower lows and lower highs on retracements. Strong trends may take time to mature, and this strategy may require weeks or months to work out.
Range trading: If a stock is moving around a certain price level, investors may attempt to trade around it. This strategy works well in a market that does not have an obvious trend or significant volatility. The forex market generally has less volatility than other markets, so range trading is an important strategy to learn.
Position trading: If you like researching the long-term fundamentals of a currency, position trading may be for you. Position traders are not worried about short-term fluctuations in the forex market. Macroeconomic factors, less important in price action or range trading, become especially important here.
Forex Trading Example in Singapore
You want to take advantage of the current price of SGD/GBP, which is trading at 0.83960/0.83970. You think this price is low and will soon rise. You want to purchase S$10,000. The margin rate of this currency pair is 3.11%, so you will need £261.13 in your account.
The EUR/GBP price does actually move up. In 4 hours, it’s trading at 0.84450/0.84460. This is a move of 48 points (0.84450-0.83970), with each point = $S0.0001, and your profit is (S$10,000*0.84450) – (S$10,000*0.83970), or £98.
Note: Using margin comes with additional risk. You can actually lose more than your cash on hand. Learn how to use leverage in forex wisely before applying a margin to your investments.
Making Money with Forex in Singapore
There are many ways to make money with forex, not just directional trading. The more profit-taking strategies you know, the more you can take advantage of different market conditions.
- Going short: If you go short on a currency pair, you are borrowing a currency to sell it. Your profit comes when you buy it back later at a lower price.
- Contracts for difference (CFDs): If you trade in CFDs, you never actually own any currencies. CFDs track the price of currency pairs and look the same, however.
- Binary options: Binary options are known as “fixed return” and “all or nothing” options. Instead of a relative profit or loss based on relative price movement, binary options offer a hard win/lose scenario. The major advantage for investors is that ROI per trade tends to be higher.
Best Online Forex Brokers in Singapore
Reputable forex brokers offer virtual accounts, real-time news feeds and extremely fast execution, among other features. The broker you choose will make a huge difference in the success you have in forex, so choose wisely. See more on Singapore forex brokers here.
These are the basic terms you should be aware of when trading forex.
Pip: This is the smallest amount that any currency can move up or down in the forex market, usually correlated with S$0.0001.
Lot size: If you trade a standard lot size in forex, you will trade 100,000 units.
Orders: An order in forex is the same as an order in a restaurant — you state exactly what you want from the market and execute that trade if possible. If your order doesn’t match what the market is offering currently, you can put that order in and wait.
Calls: A call option is a contract that allows a buyer the right to buy a currency pair until a certain date at an ordered price.
Trading for Growth
Every investor who joins the forex market is adding to the smooth movement of money across the globe. If you are trading in Singapore dollars, you are contributing positively to that currency’s involvement in the market. You deserve to be compensated for that participation, but that relies on you. Your skill in trading determines your reward. Make sure you understand the strategies to succeed before you begin risking capital in forex.
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