The first thing a forex trader should look out for to succeed in trading is to choose a forex broker that best suits their needs. A Malaysian trader would have questions such as is forex legal or halal; is it taxable and probably which forex broker is the best for trading in Malaysia?
Making sure a trader has chosen the best forex broker to trade in Malaysia is, to a certain extent, subjective. Circumstances and characteristics like trading account types, regulatory compliance, forex pair available for trading, platform useability and many others come to mind. Considering these are linked to the broker chosen, then all the more reason, finding the best forex broker should be the first step to starting trading. Getting this right, in the beginning of a forex trader’s investing journey, will save them a lot of hassle.
There are numerous broker qualities that have been touted as important which set apart a forex broker from the rest. More on this is discussed below.
Finding the Best Forex Broker for You
The key differences between trading in general and forex trading are the hours, trading position sizes and market liquidity. The forex market is the largest financial market offering one of the highest liquidities. As well as being decentralised, trading is transacted over the counter (OTC) and electronically.
It’s easy to see the appeal of forex trading compared to other types of trading. Its barriers to entry could appear easy enough for a new trader, especially the convenience afforded by online trading platforms and brokers. At the same time its vast profit potential makes it ideal for traders of old; those with enough trading hours to excel in trading. From a sound investor’s perspective, below are the 5 pointers for narrowing down the best forex brokers to trade successfully.
- Licensed and Regulated
In Malaysia, financial markets (including forex) are regulated by the Securities Commission of Malaysia (SC), but options remain open to traders preferring a forex broker regulated by an international body. This too will suffice for trading in Malaysia. The central bank, Bank Negara Malaysia (BNM) regulates the national currency or the Ringgit and therefore holds some influence over the local forex market. Although forex itself is legal and regulated in Malaysia, a trader could still end up treading on thin ice with the wrong broker.
Therefore, checking if a forex broker is regulatorily compliant is a good first step. A financial broker that is internationally regulated and licensed is ZFX, also known for their specialised multi-asset trading services.
- Trading Account Benefits
Before registering for a trading account with a broker, there are several key things to take note of. Among them: leverage, deposit and withdrawal requirements, spreads, initial deposit, and commissions. With so many brokers out there, leverages can differ greatly. The common ones range from 50:1 to 1000:1.
For Muslim forex traders, or for anyone interested in opening Islamic forex accounts, there are several to choose from. Islamic forex accounts comply with the Shari’ah prohibition on Riba which forbids interest accumulation. They are preferred by many traders for the absence of swap or rollover fees which are charged by brokers to traders who hold open positions into the next day. However, some brokers have been known to make up for the loss in the form of other fees or providing wider spreads.
It’s worth visiting the account comparison section on a broker’s website for a clear breakdown of the features offered with their account types. Additionally, to gain a better overall understanding, the trading comparison and education portal, www.pippenguin.com is a good place to start. They carry insightful broker and platform reviews updated to 2023, extensive trading guides, and the latest market news.
- Forex Pairs Availability
The best currency pairs to trade are those with high liquidity such as major pairs like GBP/USD, USD/JPY, and EUR/USD. Every trader also has their own preferences for which forex pairs to trade for many reasons. It may seem that all brokers offer a wide selection of currency pairs but in actual fact, their offering vary greatly.
Like the rest of the aforementioned criteria, the choice of currency pairs makes a stark difference in a trader’s strategies for the rest of their trading moves. The importance of currency pair choices can not be overstated.
- Platform Offering
The trading platform provided by a broker determines trading execution speed, risk managing tools, and market analysing tools (technical and fundamental), among many others. Apart from sheer trading experience and ease of use, the trading platforms a trader uses are crucial to each trade undertaken.
For a better idea, the MetaTrader 4 (MT4) and MetaTrader 5 (MT5) are examples of streamlined online trading platforms that have made the trading experience a lot easier in the past few years. They are manifestations of how far trading has come in technological advancements.
- Customer Care Support
Trading forex online can be done independently with all the tools necessary at a trader’s disposal. However, in times of missteps and mishaps, either on the part of the trader, the market or the trading platform, customer support should be easy to access at all times.
Plus, given the 24 hours that forex trading operates, opting for a broker with reliable customer support should not be overlooked.
Taking for example, the best time to trade in Malaysia is during the London-New York overlap between 9pm and 1am (Malaysia Time) when trading activity is at its peak. Should a glitch happen, and the broker’s customer support be out of reach, a trader could lose their position.
Recommended Forex Brokers in Malaysia
Opinions differ from trader to trader on the best forex broker to trade on, in Malaysia. However, the pool of resources on this question points to mainly two opinions: Islamic accounts and key features of a trading app.
As trading in Malaysia encompasses conventional and Islamic financial markets, Islamic forex accounts are popular to trade with, in Malaysia. Open to all traders in Malaysia, they create great profit potential due to their Riba compliance of banning rollover fees in trading. This may be appealing but, in reality, Islamic forex accounts still have their pros and cons.
A trader’s forex earnings in Malaysia are taxable. Hence, one notable appeal to Islamic forex accounts is the tax-exempt perks. Although forex earnings are taxable, capital gains are tax-exempt. When trading with an Islamic forex account that does not have swap or rollover fees, any gains made aren’t deemed as derived income. So, here, the income derived is not subject to income tax.
Below is a rundown of what to pay attention to when choosing an Islamic forex account.
- Regulation Compliance
It’s vital for an account to be licensed and regulated by either a local governing body like the SC of Malaysia or an international regulative organisation like the Financial Conduct Authority (FCA).
Therefore, it’s important for a trader to do their research and obtain the right information on recognised governing bodies and regulatory organisations in trading.
- Rollover Fees
With an Islamic account, rollover fees or swap fees are eliminated. Traders don’t get charged for open positions held overnight. As mentioned before, the terms and conditions aren’t always as straightforward because some brokers adhere to this prohibition for only a limited time.i.e., 14 days. So, find out if a broker imposes a limited time for the swap-free condition on an Islamic forex account.
In addition, to compensate for the absence of rollover fees, brokers can skimp on the leverages offered with their Islamic accounts.
- Hidden Fees
Some brokers charge additional fees in the form of admin fees for overnight positions, flat commissions for open positions maintained for more than 3 days, and an overnight commission fee instead of a swap fee. These are just a few of the hidden fees that a broker can charge on Islamic accounts.
- Financial Instruments Limitations
Brokers are known to limit trading of financial instruments with certain terms and conditions. Some will offer wider than normal spreads on currency pairs, others impose an ‘Islamic account fee’ for trading exotic forex pairs, and certain brokers don’t allow crypto trading.
- Required Deposit
Another thing to be wary of when deciding on an Islamic account is that some brokers require a higher initial deposit to open an account. In some instances, the initial deposit might not be that much more against the absence of swap fees. Still, the hidden charges need to be taken in to account.
At the end of the day, it’s up to a trader to weigh out the pros and cons of an account before registering with a specific trader.
The things that a trader looks for in a trading app can be the range of trading instruments offered, how user-friendly it is, interface design and cross-device compatibility. Much like choosing an accessory to blend seamlessly with one’s fortes and shortcomings, many variable factors inform a trader’s decision.
The few commonalities in the popular trading apps among Malaysians are stated below.
- Trading Instruments
A good number of trading instruments depends on which trader you ask. While some apps make it possible to trade 200 different trading instruments, another might allow 2000. Essentially, it’s up to a trader to decide on the number of trading instruments which makes a trading app a viable choice.
- Mobile Functionality
Many trading apps are cross-device enabled considering it’s now common to trade on mobile phones. How well the mobile version of a trading app works is important to traders. For example, does the mobile version have the full set of features offered by the desktop version?
Things like how much space the mobile version takes up on a phone and download speed also matter. Also, how fast features load on the mobile version count for something.
Ease of use or navigability across the app is another benchmark that traders use to decide if an app should be their choice of trading platform. A trader might look for usability such as how easy and promptly they can open and close a position, and if a dashboard is provided for tracking assets in real time which allows a trading feature withing the dashboard as well.
Other things like being able to view Trade History and easy connection to customer support all from one app also came up on top of the most desired features by traders.
The ability to seamlessly integrate web and mobile versions are also much sought after by traders shopping for the right trading app. It makes perfect sense though as traders would prefer to be able to open a position easily on one device and just as seamlessly close the same position on another device.
This is no surprise with the hectic lifestyle led many traders today, let alone society in general.
- Extra Features and Offerings
Special extras that can be found in some apps like a Demo Account that supplies $10,000 worth of virtual money to practise at trading, and the availability of live charts, technical analysis tools, relevant news and market insights that are as complete as possible are also taken into consideration by traders who want the best trading app.
Securing the best forex broker boils down to the trader. As much as any trader should know this, in Malaysia there is a strong adoption of Islamic forex trading accounts due to the potential earnings afforded by Shari’ah regulations. However, traders should stay informed on loopholes in broker terms and conditions on Islamic accounts.
Whichever way a trader decides to go on their strategies – conventional and (or) Islamic money markets, it’s best to be well-versed on both to be able to benefit from the two trading environments.
- How do I find a good forex trader?
It’s easy to see the appeal of forex trading compared to other types of trading. Its barriers to entry could appear easy enough for a new trader. At the same time its vast profit potential makes it ideal for traders of old; those with enough trading hours to excel in trading. From a sound investor’s perspective, below are the 5 pointers for narrowing down the best forex brokers to trade successfully.
- Licensed and Regulated
- Trading Account Benefits (*Islamic Accounts)
- Forex Pairs Availability
- Platform Offering
- Customer Care Support
- What is the best time to trade forex in Malaysia?
The best time to trade in Malaysia is during the London-New York overlap between 9pm and 1am (Malaysia Time) when trading activity is at its peak.
- Is forex taxable in Malaysia?
A trader’s forex earnings in Malaysia are taxable. Hence, the other appeal to Islamic forex accounts is the tax-exempt perks. Although forex earnings are taxable, capital gains are tax-exempt. When trading with an Islamic forex account that does not have swap or rollover fees, any gains made aren’t deemed as derived income. So, here, the income derived is not subject to income tax.