Table of Content
Table of Content
Best Forex Trading in Saudi Arabia: A Comprehensive Guide
Saudi Arabia has recently allowed retail traders to trade on its FX markets. Also, unlike other countries, there is no limit on how much profit can be withdrawn.
How does Forex trading work?
The forex market involves the buying and selling of currency pairs. One user will buy, while the other sells. It is important to understand that Forex trading involves speculating on possible price movements of currency pairs. You are neither investing nor saving money when you trade. Instead, you’re speculating the currency pair’s price to make a profit.
Currency pairs are displayed as financial instruments on specialized Forex trading platforms. A user buys a specific number of units (called “lots”) of the base currency, and the counterpart sells the same amount. In the EURUSD pair, for example, the trader will buy the Euro’s price in comparison to the US Dollar because they believe that the price of the Euro will increase. Those who believe that Euro’s value will decline will be selling lots of EURUSD, resulting in a sale of Euros and a purchase of US Dollars.
It is important to keep in mind that, despite the fact you are buying or selling currency, the actual value of the exchange rate does not change. When you buy the EURUSD pair, you do not purchase Euros for a Paris trip. It is more like trade on exchange rates; the user does not receive the dollars, euros, pounds, or yens. The FX market focuses on trading pairs over a short time period to forecast price movements and profit from the most accurate.
The trades can be executed through brokers offering Forex trading apps. However, other intermediaries, like banks or exchanges, are also available. It is also a more costly option.
Forex Trading through CFDs
What would be your real-world Forex trading strategy?
It would help if you took a bag of money in Euros and Dollars and Pounds Sterling, Swiss Francs, or Japanese Yen to the bank to do this. You can then buy the currency in question with the other one in your bag whenever the exchange rate is lower than expected. Suppose, for example, that you want to buy Pounds using Yens.
Are you aware of how expensive and complicated this transaction can be? CFDs are a simple way to complete this transaction.
Financial derivatives, or CFDs (assets that replicate the value of an underlying financial asset), are known as financial derivatives. Traders use CFDs to simulate a specific currency pair. CFDs enable traders to make short-term speculations on the price movements of an underlying asset (the asset that the CFD is trying to mimic) without purchasing the asset.
Forex trading platforms are equipped with excellent graphics, so you don’t need to carry a bag full of cash around. Clients can now trade from anywhere using their smartphones. Search for the CFD in the Broker’s app, then press “Buy.”
For how long should an open Forex trade remain?
The Forex trade remains open until the reverse transaction (if you ordered a buy, the Sell order would follow) is complete and profit or loss is calculated. You could complete a trade in seconds, such as buying a CFD before closing it. Or you may take hours. The duration of trades will vary depending on the trader’s objectives, trading strategy, plan, and capital.
There are several categories of traders based on their trading duration:
- Scalpers are traders who only keep their orders open for a short period of time. Scalpers keep open trades for 15 minutes before closing the positions. The scalper will close the position after a minimal price movement.
- The day trader tends to close all of their positions before the end of trading hours. This does not mean that day traders leave their trades open until the end of each day. This means he does not have an open trade at the end of the day.
- Swing traders, on the other hand, trade according to a medium-term trend. Swing traders can keep the same position for up to one month.
Developing forex trading in saudi arabia Strategies
It involves analyzing price patterns and charts to forecast future movements. To help make decisions, indicators like relative strength index and moving averages are used.
Currency strength can be gauged by analyzing economic indicators, geopolitical issues, and interest rates. Traders use news releases and economic calendars to assess currency strength.
The preservation of capital is essential. Risking more than a tiny percentage of trading capital in a single transaction is not recommended. Use stop-loss orders and take-profit orders as a way to reduce risk.
Trading Forex in Saudi Arabia – Opportunities and challenges
Saudi Arabia is a market that attracts forex traders because of its growing economy, strategic position, and attractiveness. Oil prices are volatile, and reforms in the economy create trading opportunities.
Keeping up with global financial news and regulatory issues can be difficult. High leverage also increases risk.
How do I open and trade a Forex trading in a saudi arabia account?
You must first open a Forex trading in saudi arabia account with a platform that offers Forex CFDs. We have listed some of the most popular options available locally. It is easy to open an account at one of the Brokers. You must register your personal information (such as a valid ID or proof of residence) and make a deposit using different methods. Start trading on the forex market once the account has been opened.
Essential Concepts in Forex Trading
Forex trades involve currency pairs, where one currency is exchanged for another. Major pairs like EUR/USD, USD/JPY, and GBP/USD are the most traded due to their liquidity.
Pips and Lots
Price movement is measured in pips, the smallest unit of currency movement. Lots refer to trade sizes, with micro, mini, and standard lots allowing flexibility in position sizing.
Leverage and Margin
Leverage amplifies gains and losses. While it can magnify profits, it also increases risk. Margin is the collateral required to open and maintain positions.
How does Forex trading work?
Forex trading involves transactions (buying and selling) of currency pairs. That is, one user buys, and the other one sells. To better understand how Forex works, the main objective is to speculate on the movement that the currency pair’s price may present. Hence, you are not saving when you trade, nor investing: you are speculating on the pair’s price movement in the hope of making a profit if the currency pair moves in the way you have forecasted.
Specialized Forex trading platforms display currency pairs as a financial instrument. The user “buys” a certain number of “lots” units of the base currency, and a counterpart “sells” the equivalent value of the quoted currency occurs. For example, in the case of the EURUSD pair, a trader buys the Euro price compared to that of the US Dollar, and he does this because he believes that its price will rise. In the opposite case, those who forecast that the value of the Euro will decrease will sell lots of the EURUSD pair, which ultimately implies a Sale of Euros and Purchase of US Dollars transactions.
A key aspect to remember is that despite talking about buying and selling currencies, you still need to acquire the value of the quoted currency. For example, when you trade the EURUSD pair, you must buy Euros to spend on a trip to Paris effectively. What happens effectively is a transaction on the exchange rate; no user obtains the Dollars, Euros, Pounds, or Yens. Therefore, FX trading focuses mainly on transacting pairs in the short term to forecast the price movement and make a profit with the accurate ones.
All trades are executed electronically through Broker’s apps that offer Forex trading, although other alternatives, such as banks or exchange houses, act as the intermediary. This one is a much more expensive option, though.
MT4 is the most popular Forex tool among professional traders. If you wish to try a free demo, try one of the top brokers presented before.
Forex trading through CFDs
How would you carry out Forex transactions in the real world if you want to become a Forex trader?
You would have to go to a bank or a foreign exchange shop with a briefcase full of cash nominated in different currencies, Euros, Dollars, Pounds, Swiss Francs, and Yen.
Then, whenever you see that the price of one of the exchange rates is low, and you forecast that there will be a short-term move in the exchange rate, you would buy the currency with another currency you hold in your briefcase. For example, suppose you intend to acquire Pounds with Yens.
Do you know how complicated and expensive this transaction could be? Therefore, there has to be an easy option to fulfill this transaction, and the answer is financial derivatives called CFDs.
CFDs are financial derivatives (assets that replicate the price of the underlying financial instrument). Traders use CFDs to represent a particular currency pair of the exchange rate.
So, CFDs allow them to speculate over the short-term price changes of the underlying asset (the one the CFD tries to replicate) without actually having to buy the underlying asset. An example: Investing in a CFD on the Euro-Dollar involves buying the CFD EURUSD, which is the instrument that replicates the exchange rate between these two currencies.
Forex Trading platforms have excellent graphic interfaces, where it is not required to transact with a briefcase full of money. Instead, clients can trade anywhere through their phones. To buy a CFD, search for it at the brokers’ app and press Buy.
How long should a Forex trade stay open?
A best forex brokers in saudi arabia stays open until the reversal transaction is completed (if your order was a Buy, then a Sell order should come after), and the profit or loss gets calculated.
Completing a transaction could take you from a few seconds (buying a CFD and then closing it) to hours. The duration of a trade will depend on each trader’s objective, strategy, trading plan, and available capital.
There are different categories of traders based on the duration of their trades:
- Scalpers are traders who keep orders open for minimal periods. The opened trades are maintained for 15 minutes or less before the position is closed. After a minimum movement in the price, the scalper closes the trade.
- Day traders tend to liquidate all their trades before the trading hours end. It does not imply that the day trader leaves their transactions open until the end of the day. It means that yes or yes, he goes to sleep without having an open position at the end of the day.
- Swing traders deal according to the medium-term trend, for example. They can maintain the same trade for a week to a month.
What is the cost of Trading Forex?
To calculate the cost of each trade, we (again) use the lot size. A lot represents 100,000 units of the base currency. So, the size of the lot has to be multiplied by the price of the acquired contract.
As we mentioned before, through leverage, you do not need to deposit (at an exchange rate of 1.1) $ 220,000 to buy EUR 200,000, but you must keep something like $ 2,200 in the account (because if the leverage is x100, multiply the value of your real money x100).
When does the Forex market open and close?
The Forex market operates all day, year-round, since somebody around the globe is trading, although it closes on weekends. To understand better how Forex works, trading hours are one of the most important aspects to consider since they are affected by the opening and closing of the most important financial centers in the world. They, in turn, have different time zones, which allows transacting Forex 24 hours a day.
Following are the opening and closing hours of each financial center, described in GMT:
- Tokyo: opens at 00:00 GMT and closes at 9:00 GMT.
- New York: Opens at 13:00 GMT and closes at 22:00 GMT.
- London: opens at 08:00 GMT and closes at 17:00 GMT.
- Sydney: opens at 21:00 GMT and closes at 06:00 GMT.
During the day, the trading time of one major financial center intersects with those of another territory, such as Tokyo and London and London and New York, for example. During these hours, the tradeable liquidity (the amount and volume of operations) is much higher.
How to open a Forex account and start trading?
To start trading Forex, you must open an account on a trading platform offering Forex CFDs. The alternatives we have detailed before are some of the best locally available. Opening an account with one of these Brokers is straightforward, involving registering personal info (an ID and proof of address) and depositing money through different payment methods. Once the account is open, start trading in the currency market.
Glossary of terms that you must know when starting Forex Trading
- Forex broker: An intermediary through which the exchange of assets between buyers and sellers occurs. By acting as a third party, they charge a commission and must have a license issued by some government watchdog.
- Pip: It is the minimum variance that the price of a pair can present.
- Lots and mini lots: The amount defines the contract’s volume, the amount that has been “bought” or “sold” of a pair.
- Leverage: A tool that allows multiplying the initially deposited funds.
- Spread: The Broker collects the commission when a trader buys or sells. Each Broker applies spreads on Bid and Ask orders and the chosen asset type.
- Central bank: Central banks are government entities controlling monetary policy. Their decisions directly affect their currency prices, so keeping up with them is essential when you are interested in investing in currencies.
- Interest rates: Amount paid to acquire or transfer a specific amount.
There are thousands of Forex brokers worldwide, and Saudi Arabia residents can register and trade with each. Many Forex brokers may appear similar, but there are understated differences that make each Broker uniquely suitable for a different type of trader.
Is Forex trading legal in Saudi Arabia?
Yes, forex trading is legal in Saudi Arabia, but SAMA regulates it.
Do I need a large capital to start forex trading?
No, many brokers offer accounts with low minimum deposits. However, it’s essential to manage your capital wisely.
What’s the best time to trade Forex in Saudi Arabia?
The forex market is open 24/5, but volatility varies. Consider trading during overlapping market hours for increased activity.
Can I trade Forex alongside my full-time job?
Yes, forex trading offers flexibility. You can trade during free time, but a well-structured trading plan is crucial.
How can I improve my trading skills?
Continuous learning is vital. Utilize educational resources, attend webinars, and analyze your trades to enhance your skills.