Forex Trading in the Philippines

Forex Trading in the Philippines

Are you a resident in the Philippines and want to start trading forex?  Although there is a question about the legality of forex trading in the country, you can still trade through international brokers headquartered outside the Philippines.

Due to its enormous economic improvement since a few years ago, the Philippines has gained the emerging nation status. As a result, it is rapidly becoming a major forex trading hub. Also, Philippines is among the few Southeast Asian countries with an increasing clientele of foreign-based forex brokers.

Read on to find out how forex trading works, what types of forex brokers are available, how to make money from forex trading and many more.

Top forex trading platforms in the Philippines

1. eToro- Best overall forex trading platform

It is very easy to navigate and carry out basic operations on the eToro platform. For instance, you can add instruments by searching available market, create several watch lists and even place trades directly from the watch list.

One of the most distinguishing feature is the Copyportfolios. Formerly known as CopyFunds, this is a premium product offering that is made up of selected traders or assets of predetermined strategy. It is intended to help you to take advantage of the current market opportunities.

Another feature on e-toro that is handy in forex trading is the stop-loss protection. This means that you cannot make losses beyond the set limit.  It will enable you to reduce the risk of large losses.

Pros

• Copy-trading feature
• Easy to use platform
• Impressive currency pairs

Cons

• Few customizations

1. com- Best for all experience levels

This is a well-established online broker with a huge range of tradable currencies. With low account minimum, comprehensive market research and a robust trading platform, Forex.com is perfect to all traders of all experience levels.

Forex.com is a market maker forex broker, which means it provides dealer execution. Its ability to execute trades is not affected by other market participants or liquidity providers. So, you will get a better dealer-execution even in challenging market conditions.

Pros

• Accepts clients from Philippines
• Access to over 80 currency pairs
• Wide range of education tools

Cons

• Limited customer support
• Interactive brokers-Best for experienced traders

This is a reputable US-Based forex brokers that accepts clients from Philippines. It is very popular because of the competitive commissions and margin rates. Interactive Brokers offers limited assistance because it is geared towards experienced traders.

If you would like to trade forex on your mobile device, you will enjoy the responsive and optimized trading app. It has all the features found on the desktop trading site, allowing you to access market data and execute orders.

The only issue is that it offers 14 currency pairs to trade. Like most forex traders, you will be charged a small percentage of your trade in form of spread. This is on top of a small commission that ranges between 0.08 and 0.20 depending on the volume of the currency you are trading.

Pros

• Comprehensive desktop platform
• Responsive and optimized app
• Low margin rate

Cons

• Limited currency pairs

1. FXCM- Best for high-volume trades

FXCM is a popular retail forex broker that accepts clients from the Philippines. It is regulated by reputable regulatory agencies from around the world including Financial Conduct Authority (FCA) and Australian Securities and Investment Commission (ASIC).

It has its proprietary trading platform known as Trading Station as well as third party platfroms such as MetaTrader4 and NinjaTrader. The minimum deposit is only $50 for the Standard account and $25000 for Active Trader account. You can deposit through a bank transfer, debit/credit card, Skrill, Bpay and Union Pay. Note that there is no deposit fee.

Pros

• Wide range of deposit options
• No deposit fee
• Numerous trading platforms

Cons

• No fundamental data available

1. IG-Best for novice forex traders

IG is based in the UK and is one of the biggest forex brokers in the world. It is a safe to trade forex because it is authorized by several global regulatory agencies. The platform is well-designed, easy to customize and user-friendly.

The minimum deposit is only $250 and you can use credit/debit cards, bank transfer or PayPal. Although there is no deposit or withdrawal fee, you will be charged $12 per month for inactivity for more than 2 years.

Pros

• Superb educational tools
• Guaranteed stop losses
• User-friendly platform

Cons

• Inactivity fee

What is forex trading in the Philippines?

The forex market is open 24 hours a days, 6 days a week and is worth $5trillion a day. It is very important to know the best currency to trade and the right hours to so. However, since there is a question about the legality of forex trading in the Philippines, you will need to get a reputable broker based outside the country.

Note that it is not easy to successfully trade forex in the live market. Therefore, if you don’t have any experience or completely unfamiliar with forex trading, it is advisable to do some research. Also, you can get a demo account to try and test your strategies before investing your money.

Forex trading has a reputation of causing significant losses to retail traders. So, to make the best of forex trading, you need to need to know the factors that affect the valuation of the currency. This way, you will be able to succeed in a market where a lot of retail traders fail to profit.

To start forex trading in the Philippines, you will need a PayPal account or a US dollar-denominated bank account. Alternatively, you can get an account with an international online payment system that is accepted by your chosen broker.

It is also possible to open trading accounts with major currencies like the sterling pound or euros. However, the US dollar is the most universally accepted currency by banks and forex brokers. To make a deposit, you will need to arrange the transfer of funds from your dollar-dominated bank account through your online payment account into your brokerage account. Even though this route is long, it is mostly preferred than a direct transfer from the bank to the forex broker. This is to bypass the local authorities in Philippines that discourage forex trading.

How is the FX market structured in the Philippines?

Initially, the forex market in the Philippines involved entities who acted as agents and brokers without licenses from relevant regulatory bodies. Due to increased complaint of people losing money in the market, Securities and Exchange Commission (SEC) issued advisories to state that forex trading is illegal.

SEC further advices that it does not issue any license to engage or deal with forex trading. Therefore, any one claiming to be a broker, salesman or agent should be avoided or ignored. This is intend to prevent fraud and debilitating losses to traders. Nonetheless, there is a wide array of reputable brokers based outside the Philippines where you can participate in the forex market and start trading.

The two advisories issued are only meant to discourage people from dealing with local unregulated brokers and agent. So, you won’t be violating any specific law in Philippines if you decide to open an online trading account with a foreign broker. The advisories only threatens to impose administrative fees for those that don’t comply.

Unless you have a large amount of money, a bank to trade currencies or a special government authorization, it is not possible to participate in forex trading with a Philippine-based broker. However, there are many respectable online forex brokers that accepts clients from the Philippines.

If you are based in the Philippines and serious about trading in the forex market, you can open an account with an international broker. However, you have to meet all the requirements and have an acceptable payment method such as PayPal or Skrill. There has not been anyone arrested or convicted for violating the SEC’s advisory.

How does forex trading works?

Also known as forex exchange, forex refers to the buying and selling currencies. Since people, businesses and participate in the forex market, it is the most heavily traded and active market in the world. The best part is that it is very easy to participate in the market. For instance, when you travel overseas and covert your Philippine pesos for US dollars, you are participating in the global forex market.

Since the value of a one currency can only be priced when compared to another, all prices and values are indicated as pairs. For example, USD/PHP shows the value of the US dollar against the Philippine peso.

In the arrangement, the base currency is the first while the counter or quote currency is the second one. The currencies are separated with a slash (/) sign. For instance, in USD/PHP, the US dollar is the base currency and the peso is the quote currency.

Each forex pair have a market price which is determined by various factors. The price refers to how much it takes the counter currency it takes to buy one unit of the base currency. For example, the price of USD/PHP is 50.8250. This means that it costs $50.8250 Philippine pesos to buy one US dollar.

In most cases, currency pairs will move between 50 and 100 pips in a day. However, it can be more depending on the overall market conditions. A Point in Percentage (pip) refers to the fourth decimal place in a currency pair. For example, when the price of USD/PHP moves from 50.8250 to 50.8350, that is a 100 pip move. So, if you had anticipated the move, you would have made a 100 pip profit.

Nowadays, most brokers are not charging commissions and fees and instead earn through spreads. This is the pip difference between the ask price of an underlying asset and the bid price. There are two main types of spreads: fixed and variable. In the fixed spread, the number of pips between the ask price and bid price is maintained the same and is not affected by any changes in the market.

In forex reading, leverage refers to how much more you can trade depending on your account size. For example, if your account has $1,000 and your broker offers a leverage of 1:100, it means you can gain access up to $100,000 currencies to trade. Sometimes the leverage is confused with a loan.

Margin is the minimum collateral that allows you to access the larger capital. Using the above example of 1:100 leverage, you margin will be 1%. This means that you be required to have 1% margin in your account to access the 1:100 leverage you want. In other words, to access the $100,000 capital, you will need to fund your account with 1% of this amount, which is equivalent to $1000.

To become a successful forex trader, you need to know how to use fundamental and technical analysis. Fundamental analysis is the study of the economic elements that influence the demand and supply of a currency. It include any news event, policy change, consumer price index (CPI), inflation, employment, etc. On the other hand, technical analysis is the study of historical price movement to identify patterns and forecast the future direction by using technical indicators, studies and other tools. Technical analysis will help you to not only know when to trade but also when to exit the market to avoid making losses.

Types of forex traders

The first step of any aspiring forex trader is to decide on their choice of a forex broker. There are several types of forex brokers that mainly falls into main categories: Dealing desk (DD) and Non-dealing desk.

1. Non-dealing desk forex broker

A non-dealing broker uses the prices of forex market participants to create the bid price. Also known as liquidity providers, the market participants can include banks, financial institutions or other traders.  These participants send their prices through an electronic network. This process eliminates the need of requite since prices are updated in real-time. There are two main networks that include the Electronic Community Network (ECN) and Straight Through Processing (STP).

1. Dealing desk forex traders

These are forex brokers that does not execute orders based on the liquidity providers’ price. Instead, they take the trade for themselves, which makes them the client’s counterparty. Desk dealing forex traders compete with one another to offer the best rates.

How traders make money from forex trading

In the forex market, you make money by speculating the appreciation or lose of a currency pair. The amount of money you make will depend on how much you are willing to invest. Here is an example on how you make money from forex trading.

Assume USD/PHP has a sell price of 50.8250 and a sell price of 50.8300. You think the US dollar will lose against the Philippine peso because of impeding financial policy and decide to sell five standard lots at 50.8250. Remember that a standard lot is equal to the 100,000 units of the base currency. Selling a single USD/PHP standard lot is equivalent to trading $100,000 for PHP 5,082,000. Therefore, when you sell 5 standard lots, your position will be worth PHP 25,412,500 ($500,000).

Note that there is leverage in forex trading when you will not put down the full value upfront to trade. For example, if you get a margin of 0.50%, it means you will only need 0.50% of the total exposure. In this case, it will be PHP 127,062 ($2540).

So, if the dollar falls as you had predicted, you can decide to close your position at 50.8240. Your leverage of 25,412,500 will now be $500, 009.8(PHP 25,412,500/50.8240) so your profit will be $9.8 which is equivalent to PHP 500.

Starting forex trading on eToro

Step 1: Access the application form

Go to the eToro website to access the application from. Click on the visible ‘Join Now’ button top get started with the process.

Step 2: create an account and verify

After clicking the join now button, you will be taken to page with an application form. It only requires you to create a preferred username and password as well as your phone number and email address. Accept the terms and conditions and complete the process. Alternatively, you can join using your Facebook or Google accounts.

Step 3: Deposit

To start trading on the live markets, you will to have to deposit funds into your account. When you click the ‘fund’ button, you will be directed the cashier page, which is safe and secure.

The initial deposit on eToro is $200, which is currently equivalent of PHP 10,154. Fortunately, eToro support various types of payment methods. In the Philippines, you can use local credit/debit card, Paypal, GCash MasterCard, PayMaya Visa/Mastercard and local online banking.

There is a feature on eToro known as social trading. It enables you to copy trades of more experienced traders in an easy and quick way. Click on the ‘Copy People’ button to get a list of traders together with their 12-months returns. Also, you will be able to view their current portfolio and even specific recommendations.

Pros and cons of forex trading

Pros

• Accessible 24 hours in a day and 6 days in a week
• Access to large capital amount through leverage
• Potential for fast profits
• Ample liquidity for trading
• Less chances of insider price manipulation
• low fees and commissions

Cons

• Highly volatile
• The high leverage also means more risks

5 forex trading tips

1. Understand the market

Before you start trading forex, it is very important to learn and understand the market. Take time to study the currency pairs you are interested in and what affects them before risking your money. You can make significant losses if you are not prepared properly.

1. Make a plan

If you want to become a successful trader, you will have to create a trading plan and stick to it. The plan should include your risk tolerance level, evaluation criteria, goals, etc. Make sure each trade you want to make fit in your plan.

• Practice

Use a risk-free practice account to put your plan to test. Nowadays, most brokers are offering a demo account for free. It offers the opportunity to try and test strategies before risking real money. However, to get the best out of it, take it serious and not just a passing time account.

1. Make use of the available tools

You can trade based on the news and other economic elements that affect a currency. Also, you can use technical analysis tools like the Fibonacci retracement to predict market movements. Alternatively, you can combination of the both to make better trading decisions. Make use of the available trading tools to get more potential trading opportunities.

1. Know your limits

The forex market is highly volatile. Since it is very easy to lose your money, it is important to know your limits. It is important to identify how much you are willing on each trade and set your leverage according to your needs.  The most common advice is to never risk what you cannot afford to lose.

Best forex courses

Forex trading offers the most exciting trading opportunity in the financial market. Since it’s a highly liquid market, you take advantage of the tight spreads. However, like with any types of investment your success will depend on how well you know to trade. That is why you need to take a forex course to understand everything to do with the market and how to trade like a professional. These are some of the best forex courses for Filipinos.

• Forex trading A-Z from Udemy
• Brooks Forex trading course
• Platinum trading academy
• Learn to trade
• Forex school online

Best forex books

Forex trading is not easy even for experienced investors. Fortunately, there are plenty of books that solely focus on forex trading from basic introduction to advanced strategies based on technical and fundamental analysis. These are the best forex trading books that have stood the test of time.

• Currency trading for dummies by Brian Dolan
• The art and science of technical analysis by Adam Grimes
• The disciplined trader by Mark Douglas
• Japanese candlestick charting technique by Steve Nison
• Forex trading: The basics explained in simple terms by Jim Brown

Conclusion

Forex trading carries a lot of risks that are not even found in other tradable assets. You need to use leverage and predict the price movement depending on the exchange rate in the market. Even though there is an SEC advisory against forex trading in Philippines, you can still participate in the forex market through international-based brokers.

Frequently asked questions (FAQ)

1. Why did the SEC give the advisory against forex trading?

Due to increased complaints from investors losing money in the forex market, SEC gave the advisory to discourage people from engaging with unlicensed brokers.

1. Can I be arrested for trading forex in Philippines?

There has not been anyone arrested for trading forex since the advisory was issued. Also the advisories did not discourage opening a trading account with an international-based broker.

• How much can I make for trading forex in Philippines?

There is over $5.1 trillion traded per day on the forex market. If you become a good trader, you can get a small slice of the pie.

1. How to become a successful forex trader?

The best way to become a successful forex trader is to make a trading plan and testing strategies before investing your money.

1. How much do I need to start forex trading?

This will depend on the broker you choose. Nonetheless, you can start with as small as $100.