You’re probably wondering how much do foreign exchange centers earn when you exchange your dollars or currencies into Singaporean dollars. You see the exchange rates daily on the news, and you see a higher or lower purchasing rate for Singaporean dollars using your foreign currency. At home, you’ve calculated the difference and felt that FOREX trading and centers earn so much from it.
Luckily, you don’t have to open a foreign exchange center and obtain a license to do FOREX trading. You’ll just have to read through this detailed guide to learn about your earning opportunities.
What Is FOREX?
First things first, what is Foreign Exchange?
Singapore’s Foreign Exchange is dependent on the global foreign currency market, which is decentralized. This means anyone can access it from anywhere at any time, and they can perform transactions on a daily basis. Therefore, you’re the assessor, seller, broker, and client all at once when FOREX trading in the foreign market.
You might feel it’s a bit similar to the regular stock exchange markets, and you will be right. However, stock markets close by the end of the day. FOREX markets operate all day and close only during the weekends. This dynamic is different — and it entails different trading strategies too.
However, just like stock markets, supply and demand — the bread and butter of economics — are the rules that dominate the currency rates on a daily basis. FOREX is a great measure of local economic performance too with the market using the US dollar as its baseline.
Can Anyone Just Enter FOREX in Singapore?
Any Singaporean or foreigner working in the country has the right to exchange their currencies at any time. Foreigners are mostly welcome because they will need to exchange their foreign currency to use the national legal tender for goods and services.
However, if you’re planning to use FOREX brokers, websites, and other services in Singapore, you’ll need to comply with their requirements to get registered. Often, it involves registering an email, confirming your initial deposit, which ranges into thousands of Singaporean dollars per transaction, and agreement to their respective terms and conditions.
Who Are The Key Regulators of FOREX in Singapore?
The Monetary Authority of Singapore (MAS) regulates all FOREX broker activities in the country. They do not regulate the activities of FOREX clients who transact by purchasing and selling currencies, but the brokers that make it possible.
All FOREX brokers should register themselves with MAS. Brokers have a specific set of practical and academic requirements before they become licensed. Alternatively, banks and money exchange centers have their respective license requirements too. The only requirement for Singaporeans and FOREX buyers and sellers is to pay the amount needed to exchange their money into another currency.
How Does It Work?
As we explained earlier, FOREX markets work by allowing you to trade in your foreign currency or Singaporean dollars into the currency of your choice. You calculate your net profit by considering the broker’s fees (if you’re using online services and brokers) and the difference between your currency and the price of the currency you want to exchange into.
For example, if you have USD$100 and one US dollar is equivalent to S$1.38 excluding your broker’s fees, then you’d get about S$101.38. If your broker’s fees are S$0.20 per US dollar, then your final exchange amount is S$101.18.
This example gives you a profit of S$1.18 including broker’s fees. If you have $1,000, you’ll get higher profits — especially if you continue to increase the amounts you exchange.
Important Terminologies Every Trader Should Know Before Starting
Before you begin, it’s important to know the common lingo that exchangers and brokers throw around. Familiarize yourself with most of them because you’ll see them most of the time once you start exchanging money with brokers or online FOREX platforms.
Base and Counter-Currencies
The base currency is the amount you’re holding and the counter-currency is the foreign currency amont you can get. They’re called base and counter because FOREX buyers are simultaneously buying and selling currencies at the same time. Therefore, the report will always indicate that the currency was purchased at base/counter price on all documentation and receipts.
Long and Short
Brokers know these two very well as the long and short positions in the traditional stock market. However in FOREX, these two concepts are different.
Going long means you’re buying units of the base currency and selling most of your foreign currency. In this case, you’re banking on the position of US dollars by buying more of them and selling other foreign currencies you currently have.
Going short is the opposite, and you’re mostly trying to balance your diversified inventory of US dollars, Singaporean dollars, and other currencies.
While it isn’t mentioned in this section, squaring off means selling your base and counter currencies to attain a zero position — the initial position and profit you’ve had before you bought or sold your currencies.
Bidding, Asking, and Spread
Market makers are money changers, brokers, and online platforms MAS regulates. All FOREX traders can receive buy and sell quotes from these market makers. You can expect them to decrease the amount of currencies they’re willing to buy and increase the amount of currencies they’re willing to sell. Respectively, these are the bid and asking prices. The difference between these two is the spread, which is the profit they receive from every exchange.
These are FOREX market future contracts with fixed sizes. Lots are concepts in the stock market too. For example, USD$1,000 might be considered a single lot, and USD$5,000 is considered five lots. Some market makers might ask you to buy a minimum of lots for rigid currencies and better minimal lots for high-value but easy to liquidate currencies.
Buying currencies in lots ensures the market makers gain enough profits to cover their baseline and give them sufficient profit. The MAS allows this activity but heavily regulated and penalizes brokers, platforms, and other market makers that fail to follow its guidelines.
One single pip can be equal to 1/10000 of a currency or even more. Pips are the smallest movements currency quotes can move. Most FOREX traders will find pips important because a small currency motion will help them gain more profit in the process. It’s a usual part of FOREX lingo, and you’ll need to familiarize yourself with it.
How to Begin FOREX Trading in Singapore
Anybody can begin FOREX trading in Singapore. If you don’t have foreign currencies, you can purchase ones with good liquidity. Consider currencies from countries with a stable or progressive economy. Their economic boost will likely see increasing value in the currencies you’ve purchased — especially once trader demand increases for that particular currency in the future.
You can trade foreign currencies through money changers, brokers, or online platforms. Always be wary and validate FOREX reports before you begin trading your Singapore dollar or current cash on hand.
Only work with MAS-authorized brokers to prevent getting scammed off your hard-earned money. Numerous Singaporean platforms exist including Plus500, Saxo Bank, XM Group, easyMarkets, ThinkMarkets, VantageFX, and others. IG is one of Singapore’s highly-recommended platforms because of its convenience and online accessibility. Be wary that the initial currency deposit can range from S$5,000-S$10,000.
Is FOREX Trading in Singapore a Good Source of Income?
FOREX trading is an excellent way to supplement your income, but it might take a while before it becomes your main source of income.
Its decentralized market is one reason it will take quite a while before it can become an excellent source of money. Your employment income allows you to buy more foreign currencies and benefit from economic increases in their respective countries.
FOREX trading is excellent because of the following reasons:
FOREX markets do not restrict the amount of money you can use for trading. Because of its decentralized nature, there is no market regulation — only observation of criminal and fraudulent activities. Furthermore, you won’t need to anticipate the opening and closing of markets during weekdays because trading happens 24 hours a day and five days a week.
Furthermore, online platforms, brokers, and money changers are transparent. News outlets nationwide have updated figures on exchange rates, and it’s impossible to rig or manipulate the market to a country’s advantage. This makes it one of the best options for beginning investors with just enough capital.
A Wide Variety of Trading Options
One currency isn’t a guarantee for instant success, but you can trade in an unlimited number of currency pairs with just one single currency. This makes investment diversification — the very heart of good investment practices in both FOREX and stock markets — easily possible. In short, if you’re a risk-taker, you have the same options as that of low-risk investors.
This is possible all thanks to the innate liquidity of almost every currency. You can enter and exit the market in just seconds, and you can gain profits and only minimal losses then.
Low Transaction Costs
Market makers can only charge so much until the MAS alerts them of fraudulent or unfair pricing practices. In general, FOREX transaction costs are lower if you compare it to the stock or futures market. The market’s transparency makes it impossible for brokers, money changers, and online platforms to have a radically-different cost from their peers.
Thanks to leverage, most investors gain 20-30 times their original investment with the right choices. While it might take quite a while to see the results because currency values only move by pips, the significant and solid leverage makes it one of the best investments that grow bigger in the next few decades.
It’s Not So Good For the Following Reasons:
However, without regulation, the market is highly fluctuating. While currency supply and demand is stable in other countries — especially developed nations — currency values might wildly fluctuate. Therefore, no true minimum-risk guarantee can exist because of the lack of market regulation. Furthermore, counterparties can always shift their contracts — but never their prices as per the MAS’ regulation.
Limited Operating Time
The markets work 24 hours a day and 5 days a week. Unfortunately, humans can only work for eight hours or even less. Therefore, you as a trader will likely use different kinds of methods or techniques that help you protect your investments while the market continues to move without you. Without these methods or techniques, you place your investment at a risk of loss even as early as the following day.
No Movement Limits
There’s no limit to a trader’s movement in the FOREX market. However, highly-leveraged bets are no guarantee that the risk factor will always be low. Therefore, mentorship or learning through experience might lead you through a painful road of loss before you can make any kind of profit through the FOREX market.
How Can I Start Opening My Own FOREX Account?
Every online FOREX trading platform has its own unique requirements for FOREX market trading. However, most will ask you for different requirements, which might include a bank account you’d want to link for your transactions. However, platforms and brokers will always ask you for a minimum initial deposit.
It’s always best to read reviews about online platforms or FOREX brokers you intend to use. Always go for platforms and brokers that MAS regulates because the decentralized FOREX system can be dangerous for first-time traders. MAS-regulated platforms always accept SG residents and foreigners and give you recourse if you feel the broker has wronged your transaction.
Lastly, if you are short on capital but want to try out FOREX, you can always borrow money from dependable moneylenders. No need to go to your bank; moneylenders that the Registry of Moneylenders and Ministry of Law oversees are dependable. Therefore, with proof of your income and employment, A1 Credit Solutions, Fortune Credit, and other moneylenders in Singapore can immediately help you with all your needs.
It’s Simple and Easy to Earn Through Singapore’s FOREX Nowadays
FOREX market and trading can be quite confusing at first. Also, it needs you to be patient, observant, and resilient during your first few investments. But, you will learn all the necessary skills, movements, and buying or selling signals to give yourself excellent profit that can supplement or ultimately replace your income in the near future.