Forex trading is a popular way to make money among UAE citizens and expats. Trading with forex refers to buying and selling international currencies and profiting from the price difference. It can be highly profitable, but it also involves risk of losing money. To increase chances for profitable trading with forex, it is important to consider the following factors: brokers (with the right trading tools), risk management tools, technical analysis tool, capital and trading strategy.
This guide helps users to increase their chances of making money with forex trading by sharing a list of top brokers, explaining the main terminology, and sharing main steps to get started.
What is Forex Trading?
Forex trading refers to trading with international currencies, with the intent of making profit. It involves buying one currency and selling (exchanging) it for another, speculating that the bought currency will increase in value.
What Are The Main Forex Terms To Understand?
The first step that helps increasing the chances of successful forex trading is to learn the main terminology. The main forex trading terms are explained below.
- Currency Pair, FX Pair, or Forex pair – international currencies are traded in pairs and displayed as quotes against each other. Traders always see two names of currencies with a slash in the middle (EUR/USD, AED/USD). The first currency of the pair is always the base currency, while the second currency is the quoted currency.
- Major, Minor, and Exotic Currency Pairs – Forex pairs are divided into three categories: major pairs, minor pairs, and exotic currency pairs.
The major forex pairs are the most often traded currency pairs and include EUR/USD, USD/JPY, GBP/USD, and USD/CHF. These are the most suitable for beginner traders because they come with the lowest trading fees, aren’t as volatile, and are highly liquid. Minor forex pairs include less traded currencies including SEK, SGB, NZD, NOK, and TRY. Exotic currency pairs are even rarer traded and include BRL, SGD, and others.
- Spread – The spread is the difference between the bid and ask price. The bid price (also called the sell price), is the price at which traders are selling their currency pairs. The ask price (also called the buy price) is the price at which traders are willing to buy forex pairs for. The spread is collected by brokers as a compensation for their activity of market making. In other words, it is their way of making money with forex trading.
- Leverage and Margin (Margin call) – leverage refers to trading with borrowed money from the broker to amplify chances of profit. Margin on the other hand, refers to the minimum amount of money traders are required to deposit on their account to cover their losses. A margin call refers to a request by the broker (lender) to the trader to deposit additional funds when the deposited amount drops below a certain value.
What Are The Characteristics of the UAE Forex Market That Make It Attractive For Forex Traders and Investors?
The UAE forex market is stable, backed by a strong national currency (AED). The stability is based on the strong UAE economy which is diversified and relies on different investment sectors including commodities (gas, oil), tourism, real estate, and financial services. Combined with supportive fiscal policies, political stability, and currency peg of the Dirham to the USD, it helps to build a safe and resilient forex market, attractive for foreign capital investments.
The UAE market has beneficial tax laws compared to other markets. Profits of UAE citizens and companies made with forex trading are subject to a 0% income tax in UAE. This makes the UAE market attractive for forex traders around the globe.
Forex trading in the UAE is legal. Financial activities on the UAE forex markets are regulated and monitored by the Dubai Financial Service Authority (DFSA) and the Securities and Commodities Authority (SCA). The regulatory environment helps to protect traders from losing money on scams and unreliable brokers.
The UAE forex market is using advanced financial infrastructure and technology systems that make it easy for investors to get started. Furthermore, the UAE government has adopted investment friendly legislation that makes it easier for individuals and companies to become part of the UAE financial ecosystem.
What Are The Different Types Of Forex Markets Available in The UAE
The 3 different types of forex markets in the UAE are listed below.
- Spot Market– is the primary market where forex pairs are traded and exchange rates are formed based on the difference of supply and demand.
- Forwards Market – refers to the market where traders agree on a specific currency exchange rate to trade at that rate on a specific date in the future.
- Futures Market – The futures market works the same as the forwards market, but the contracts are exchanged on an exchange or brokerage platform instead of in private.
How Choosing The Right Broker Increase Chances Of Making Money With Forex in UAE?
Choosing the right broker can make the difference between making profit and losing money. Criteria that help choosing the right forex broker and increase chances for profit are listed below.
- Availability of forex trading instruments. Brokers with a wider range of forex instruments should be preferred. They allow deverzification, flexibility and hedging which increases chances for profit. The most common instruments are forex currency pairs, forex derivatives (forex CFDs, options, futures), ETFs and currency swaps, micro lots etc.
- Fees. Forex brokers charge two types of fees: trading fees (spreads, commissions) and non-trading fees (overnights, conversion fees, deposit and withdrawal fees). Fees vary significantly between brokers. Higher overall fees decrease profits.
- Reputation. Choosing a reputable broker helps avoiding scams. Reputable brokers are well regulated, have clean history track record and a great number of positive users feedback.
- Order Execution Quality. Brokers with fast and reliable trade execution (low slippage) offer better chances for profitable trading. They help traders to execute trading opportunities on time.
- Trading Platforms and Features. Brokers with the right set of platform and trading features boost traders chances for profitable trading. Platforms and tools offered by brokers differ based on knowledge level, accessibility, user friendliness, third party integrations, charting and analytics tools.
- Personal Preferences. Preferences that need to be to considered when choosing a broker include: Religion (Islamic account options), Language (Arabic, English), Trading style (automated trading, swing trading, day trading, algorithmic trading, leverage)
To help you choose the right forex brokers as a UAE trader, business24-7 created a list of top choices.
How To Start Trading With Forex in The UAE? – A Step by Step Guide
Steps traders need to take to get started with forex trading in UAE are listed and explained below.
Step 1. Consider a Forex Trading Course or Mentor
To increase chances of successful forex trading, traders should consider seeking the help of a mentor or forex trading course. Both options help traders to avoid common mistakes, expand their knowledge, confidence and increase chances for profit. The best forex trading courses are listed here.
Step 2. Select a Reliable Forex Broker Available in the UAE
The most common way to trade forex in UAE is using a online forex broker. When choosing a broker, traders should consider forex trading instruments, fees (spreads and commissions), accessibility (web, desktop, mobile app), trading tools & platforms, research & education, regulation, Islamic accounts availability and customer support.
Step 3. Develop a Trading Strategy
Trading strategies help traders make decisive trading decisions and increase chances of making money with forex trading. Traders need to develop a trading strategy considering the following factors: trading goals, knowledge level, risk level and experience. A solid trading strategy is quantifiable, consistent, and verifiable. In other words, a trading strategy should have clear goals and be strictly followed.
The 3 most profitable forex trading strategies are listed below.
- Swing Trading – refers to a trading strategy where traders hold positions for multiple days, weeks, or months to capture medium-term price movements (’riding’’ trends). Swing traders typically use technical analysis combined with fundamental analysis to identify key trends, support, and resistance levels.
- Breakout Trading – this strategy involves opening positions when forex prices break out of their usual trading range, support, or resistance levels. Traders make use of technical analysis and indicators like Moving Averages, Bollinger Bands, and the Relative Strength Index (RSI) to detect potentially profitable trading setups and points of entry.
- Trend Trading – refers to a strategy where traders identify the direction of a trend and place trades in the same direction (similar to swing trading). Traders often use technical analysis tools to help them identify trends.
It is crucial to choose the right forex trading strategy as it determines the amount of risk the trader will take and the potential profits that can be achieved.
Step 4. Back-Test Trading Strategies on Demo Accounts
Demo accounts allow traders to test their trading strategies with virtual money. In other words, they allow traders to trade the markets without risk of losing real money. Demo accounts also help traders to get familiar with the trading platform, features and tools offered by the brokers. The use of a demo account increases overall chances of successful trading.
Step 5. Check If Your Forex Trading Strategy Is Compliant With Sharia Law
Islamic traders need to check if their forex trading strategy is compliant with Sharia Law. As Sharia law prohibits earning or paying interest (Riba), forex traders should only trade using a Islamic swap-free accounts.
Tips To Increase Chances For Profitable Forex Trading In UAE
Tips to increase chances of profitable forex trading are listed below.
- Keep a Trading Journal – Keeping a trading journal to log and analyse trades increases chances for profitable trading. It helps to identify behavioural, emotional and trading patterns. Additionally, it allows traders to keep track of their earnings and losses to improve their forex trading skills.
- Prefer Fixed Spread Brokers – Fixed spread brokers allow traders to know exactly how much their current trading position costs. Their trading fees are fixed and can’t increase in times of market volatility. Predictable trading costs help to increase traders profitability.
- Use Leverage Only On Tested Strategies– Trading with leverage (borrowed money from the broker) allows traders to amplify their trading position. While it increases potential profits, it also amplifies the risk of potential losses. Trading with leverage should be only used on tested and profitable trading strategies.
- Control Emotions – Keeping emotions under control reduces mistakes and increases chances of successful forex trading. Trading tools that help traders to control emotions include automated trading software, trading signals, psychological training courses and trading with less capital.
- Make Use Of Forex Trading Courses and Mentors. Courses and mentors allow traders a better understanding of key forex trading elements including trading strategies, trading tools, leverage, risk management and psychology. Trading courses and mentors help traders to gain in knowledge and confidence which increases chances of successful trading.
How Are Profits Generated With Forex Trading?
Forex trading refers to exchanging international currencies, where the traders aims to buy the currency that will increase in value. If a trader exchanges buys the currency that increases in value, he is making profit. It works the same way as when people travel to other countries and exchange their money to the local currency to pay for goods and services. Forex traders buy and sell currencies for one another. The fluctuation in the exchange rate is based on supply and demand.
Every forex trading currency has its own three-letter code. The United States dollar is quoted as USD. The Euro is quoted as EUR, and the UAE Dirham is quoted as AED. The most commonly traded forex pair is USD/EUR, which resembles the value of the dollar against the euro. In forex trading, all currencies are displayed in pairs.
Which Are The Most Profitable Forex Currency Pairs?
There is no exact data that reveals which forex currency pairs are the most profitable. The profitability of forex currency pairs depends on the current state of the forex markets.
Some traders believe that the most volatile currency pairs are the ones that can be the most profitable. Other forex traders state that the most liquid forex pairs are the best to trade. According to data published by the Bank of International Settlements (BIS), the most-traded currency pair is EUR/USD.
The most traded forex currency pairs and their daily trade volumes in UAS are compared in the table below.
|Forex Currency Pair||Daily Trade Volume (in billions of USD)|
What Are Forex Trading Sessions in UAE?
Forex traders from the UAE can trade the forex markets on 4 major trading sessions: the Sydney session (5:00 AM to 2:00 PM UAE time), the Tokyo session (7:00 AM to 4:00 PM UAE time), the London session (11:00 AM to 8:00 PM UAE time), and the New York session (8:00 PM to 5:00 AM UAE time).
What Are The Main Advantages Of Forex Trading in UAE?
The main advantages of forex trading compared to other investment options are listed below.
- Decentralized (OTC) Market – The forex market is a decentralized market where transactions are conducted directly between two entities (traders, companies, banks). The exchange between parties on the OTC markets happens electronically, which makes forex trading faster, more convenient, and more accessible for investors.
- High Liquidity – The forex market is the largest global financial market with 6,6 trillion dollars of daily turnover. Its high liquidity guarantees fast and reliable order execution also on higher volume and exotic trades.
- Low Transaction Costs – Forex trading transactions are low cost. Brokers charge low fees (commissions and spreads) compared to other asset classes like stocks, commodities, ETFs, and cryptocurrencies.
- Low Entry – Forex trading requires low minimum deposits (from $1) to enter the market. Forex brokers offer accounts that allow trading with smaller amounts (cent and micro-lot accounts).
- Easy to Start – Forex trading is accessible and easy to start with with little knowledge and experience. The most common tools that allow inexperienced traders to get started include social copy trading tools, trading signals, PAMM & MAM accounts.
This guide covers the key elements of how to make money with forex trading in the UAE. It guides users through the main forex terms, forex market specialties that need to be considered, a step by step guide to get started, and tips to increase chances of profitable trading.
It is important to remember that trading with forex is highly profitable, but also involves risk of losing money. To increase chances for profit traders should follow the steps explained in this guide.
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