The Republic of Singapore is a major financial hub in Southeast Asia for international trade, financial services, innovative technologies, capital investment and, of course, forex and CFD trading. After London and New York, it is home to the next largest foreign exchange centre, and its highly educated population of 5.6 million people is very attuned to the financial markets and their opportunities.
Traditional retail forex trading has been available for decades, but the advent of contracts for difference (CFDs) created a very popular mode for trading currency pairs, both in Singapore and around the world. If you would like to discover more about this exciting new medium, Forextraders is here to help you learn about CFDs and their benefits. We will also tell you a bit about how forex trading is regulated in Singapore and how easy it is to get started in five easy steps. Lastly, we can help you choose a reliable broker from a list of the very best CFD brokers in Singapore.
Why Trade CFDs in Singapore?
If you are interested in CFD trading, Singapore is an excellent location to start trading. Forex brokers are in abundance due to the presence of its large forex exchange centre, its educated populace, and its burgeoning economy. The economy in Singapore has grown steadily over the past five years, even though there was a slight contraction in 2020 due to the COVID-19 pandemic. Its economic freedom rating, as measured by the Heritage Foundation, is the highest of 39 countries rated in the Asia-Pacific region.
Singapore has a highly developed free-market economy, bolstered by its stable banking infrastructure, its ‘AAA’ credit rating, a lack of corruption, prudent central banking policies and measures, and the obvious transparency of both its legal and governmental framework. Within this favourable backdrop, the local retail forex trading community has thrived and is currently estimated to exceed 50,000 active traders. Forex trading is legal, as are CFDs, and the Singapore dollar (SGD) freely floats on the global forex exchange, maintaining its stability versus the US dollar for the past decade.
Singaporeans have long recognised the many benefits attributed to trading foreign currency pairs, but they are also quickly becoming aware that trading CFDs can also be a good way to trade. When you purchase a CFD from a forex broker, you are speculating on the price movement of the currency pair without having to buy the underlying asset. You can trade your position back to your broker for a profit. An opposite price movement will, respectively, result in a loss. The opposite is true if the market moves against you – you must buy an offsetting trade.
The popularity of trading CFDs has grown enormously worldwide, due to the low level of capital needed at the outset. While there are margin considerations, you do not need to buy the underlying asset and commit a high level of your capital to the effort. Commissions are not typically charged for forex pairs, though overnight fees may apply for positions held for more than a day. The cost comes down to the spread, both at purchase and at closing.
The application of the spread at the outset of a CFD trade causes your value in the transaction to start in a negative position. In other words, the market must move in your predicted fashion to first cover your spread amount and then provide a profit after netting a closing spread. Leverage can also magnify your potential for profit, but also your potential for loss. As the market can change direction quickly, a CFD trader must always be mindful of the margin position of the trade. If you exceed your margin limit, the broker will automatically close the trade.
While the advantages of CFDs are many – i.e., low margin requirements, easy market access, low fees, and no restrictions on shorting or day trading – these instruments are still high risk. Trading them is different from the traditional trading of forex pairs. Practice time on a broker’s demo system is strongly advised in order to become familiarised with this popular medium and to perfect a trading strategy that works in this market.
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Who regulates CFD trading in Singapore?
The regulatory body with oversight responsibility for forex and CFD trading in Singapore is the Monetary Authority of Singapore (MAS). It has established rules for the registration and licensing of forex brokers within the country, and it reviews the compliance of these brokers from time to time. MAS was formed in 1970, and unlike many other developed countries, it performs the dual role of a regulator and the Central Bank of Singapore. All regulatory and monetary policy guidelines emanate from one central agency.
MAS also allows a degree of freedom for Singaporean traders. The agency does not restrict your use to only brokers with a physical presence in Singapore or that have a licence issued by it. You may choose an offshore broker, but the agency strongly recommends that you go with a reputable one that is regulated by a major regulatory body. Offshore brokers in exotic locales often promote unfair business practices or outright fraud.
A step-by-step guide to trading forex in Singapore
For traders, it is imperative to accept that forex trading, whether in the traditional way or with CFDs, is high risk, and due to this high risk, practice trading is a prerequisite for developing your skills. Forextraders can help you with your learning phase, but hours on a practice demo accounts are a must to improve yourself.
Follow these five steps to get started trading forex in Singapore:
- Choose a Broker: With hundreds of brokers to choose from, how does one go about finding the best one? Forextraders has prepared a list of the best candidates for your consideration. Brokers such as IG are always perennial top choices, but one of the other brokers on this list could be the one that fits your trading style. Try out its demo system to seal the deal.
| Broker | Features | Regulator | Platforms | Next Step | |
|---|---|---|---|---|---|
 Your capital is at risk
Founded: 2014 |
|
FSPR | MT4 | ||
 73% of retail CFD accounts lose money
Founded: 201473% of retail C... |
|
FSA SC | MT4, MT5 | ||
 Your capital is at risk
Founded: 2006Europe* CFDs ar... |
|
ASIC, FSA, FSB, MiFID | MetaTrader4, Sirix, AvaOptions, AvaTrader, Mirror Trader | ||
 Between 74-89% of CFD traders lose
Founded: 2010Between 74-89 % of retail investor accounts lose money when trading CFDs |
|
ASIC, FCA | MetaTrader 4, MetaTrader 5, cTrader | ||
 77% of CFD traders lose
Founded: 200777 % of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. |
|
ASIC, CySEC, FCA | eToro Platform | ||
 Your capital is at risk
Founded: 2009, 2015, 2017 |
|
ASIC, CySEC, IFSC | MT4 Terminal, MT4 for Mac, Web Trader, iPhone/iPad Trader, Droid Trader, Mobile Trader, MT5 | ||
 Your capital is at risk
Founded: 2006 |
|
CySEC, DFSA, FCA, FSB, SIA | MetaTrader4, MetaTrader5, cTrader, FxPro Edge (Beta) | ||
- Open & Fund an Account: All brokers must comply with international regulations that dictate that they know their customers. In this regard, you will have to submit personal ID information, but the broker will encrypt this data for security purposes. Approvals can come quickly, but if more verification is necessary, then add a day or two. Funding will follow after you have chosen a payment method.
- Make Your First Trade: If you want to become a skilled trader, do not jump into the market with both feet on day one. Veterans attribute their skills to many practice hours on the demo systems. A disciplined trading strategy is a must-have, and it can be complex or as uncomplicated as a simple moving average crossover strategy. Take your time developing your step-by-step plan and refer to our helpful articles in this area. When you make your first trade, start with a small amount and slowly work your way up to larger positions. There is no rush.
- Manage Your Risk: Do not forget to manage your risk according to accepted risk management techniques. These principles will guide your position sizing, your placement of stop-loss orders, and show you how to lock in profits for a winning position.
- Enjoy Trading: Trading forex pairs and CFDs can be profitable, but you will have losing trades. Opening a position is a relatively straightforward task, but knowing when to close your position will test your nerves and invite your emotions to interfere. Stick to your plan.
Conclusion
Are you interested in CFD trading in Singapore? The regulatory environment is one with your best interests at heart, and there are many reliable and capable forex brokers located both in Singapore and in heavily regulated offshore jurisdictions to serve you. The local retail forex trading community is healthy, educated and growing. If you want to become a member of this group and live to be a veteran forex trader, then adhere to the guidance espoused in this article.
CFD Trading in Singapore can be a little more challenging than buying and selling lots in the currency pairing of your choice, but your success will depend on the same factors: preparation, practice and a step-by-step plan of attack. Follow your plan and employ risk management techniques to ensure that you will survive and thrive another day. The best traders will also tell you to treat CFD trading in Singapore like a business. Keep your emotions at bay, appreciate your wins and losses, but do enjoy this exciting activity.
Forextraders' Broker of the Month
BlackBull Markets is a reliable and well-respected trading platform that provides its customers with high-quality access to a wide range of asset groups. The broker is headquartered in New Zealand which explains why it has flown under the radar for a few years but it is a great broker that is now building a global following. The BlackBull Markets site is intuitive and easy to use, making it an ideal choice for beginners.