Overview of Forex Trading and Foreign Currency Exchange Rates in Malaysia

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Overview of Forex Trading and Foreign Currency Exchange Rates in Malaysia


“Forex” is the combination of two words, which are” Foreign” and “Exchange”. This short form is employed for the global market where money and currencies are exchanged against one another. On account of that, the forex exchange rates or forex rates are determined by the factors and forces of demand and supply exclusively. The Foreign exchange market is like a large foreign currency exchange booth. Here currencies are sold and bought in exchange of each other. You can seek advantage of foreign currency exchange rates, for instance, you get to know that the Euro is about to raise in value, then you buy Euro at the present moment in time, hang around for the forex rate to get increased in the value and then put your Euro on sale in the market for any other currency at the higher forex rate. This is basically how stuff works on the Foreign Exchange market. A single difference is that the volumes of currencies are much bigger on the market. In this way, one layman can establish a side business to get more money in addition to its regular business or job. The verity that foreign currency exchange rates or forex rates always remain in unvarying fluctuation is the thing what causes earning capital on the foreign exchange market potential at all the time. In view of the fact that forex rate or foreign exchange rate of different currencies is set relative to one another, a value rise in one coinage or currency is actually the loss in the other currency. In this way, we have got the notion of the currency pair, which is one of the most vital concepts in the trade of currencies. The currency pair easily represents the forex exchange rate or forex rate of one currency relative to another. For instance, if we say that EURUSD is 1.1505, actually means that the cost of 1 EURO is actually 1.1505 dollars. The currency of Malaysia is known as the “Ringgit”. One ringgit is equal to 0.22 US Dollar currently. The foreign exchange rate never keeps stagnant but always keep changing. This is why this business and trading offers a great prospect for the traders on this market.

The most famous Malaysian Ringgit or forex exchange rate is Malaysian Ringgit to the US Dollar rate. MYR is the currency code of Malaysian Ringgit and RM is the currency symbol. The Malaysian forex rate is on move. Malaysia has very much transformed itself, for instance, in the past some forty years back, it was the exporter of unrefined and raw materials but now it has become one of the biggest emerging economy markets in Asia. Still, Malaysia is exporting oil and gas as it major exports which bring almost 40% of state revenues, but it has dramatically moved into the local value-added produce chain as well. On account of this transformation, Malaysia is attracting modern investment capital in its Islamic finance, biotechnology, high-tech industries, and services. On the virtue of these advances, many regional investors have already become dynamic in the investment vehicles involving retail trading of forex. The Malaysian foreign currency exchange rates have got valued since the worldwide depression by 26% in 2009 before shrinking to the lower levels subsequent to commodity prices settled down and the rate of an oil barrel got the shrink to more rational rate point which is below $100. Meantime, the development of forex trading in Malaysia has been a difficult one. Malaysia is found to be a striking target for forex brokers just as the situation in several Middle East Muslim states developed through the commodity exports.

The central bank of Malaysia is the Negara Bank and responsible for managing the Ringgit. Responsibilities related to regulation are up to the Securities Commission of the Malaysia. The headquarter of this commission is in Kuala Lumpur. This commission supervises the traded exchange products along with the commodities, forex trade future, and brokers activities in Malaysia. However, the regulations to accommodate the retail foreign exchange trading have yet not been upgraded and pronouncements and statements from the government officials suggested that a few kinds of trading and businesses may become illegal. To find the legal ways often includes sticking with the regional banks that are non-supportive for leverage or influence to any degree. The central bankers have become infamous for disappointing speculations and rumors in some forms, however, trading the currency pairs which do not include the Ringgit leans to be satisfactory. An interpretation is designed to limit flows of Malaysian currency and keep hold of audit trails as for the tax collections.

The official belief or religion of Malaysia is Islam. There are almost 17 million Muslims forming almost 60% of total population of the country. The forex brokers of the region are indebted for offering the particular law accounts which are appropriate to draw the bigger sector of impending traders. However, the Fatwa Council of the region has ruled that business and trading in currency and money spot markets abuse their principles. The regional Fatwa, however, lacks the power and authority to enforce its rulings. The Islamic Jurists of other regions in the world have not agreed with this regional ruling. In Malaysia, if you belong to the Muslim faith and consider retail foreign exchange trading, then make sure reviewing a lot of materials present on the Web and Internet and act as your conscience directs you to reach your personal assessment.

Once you have passed these obstacles, an aspirant trader has to select his business associate or partner from the host of potential forex brokers. With the intention to prevent you from scams and frauds, it is strictly advised that you put in the time that is taken to the completion of detailed review prior to making any final decision. Security and safety must be topmost on your preferences and priorities. You need to check the credentials having authorities, make verification that there actually is the local office that supports your needs along with the validation of the quality of your chosen traders with the others in the locality. Be cautious to keep away from the offshore firms. It may be a nightmarish waiting to happen, if you press your authorized rights in some foreign jurisdiction. You should choose the best forex broker who knows well about the foreign currency exchange rates or forex rates.

The Advantages of Forex Trading in Malaysia

A survey was conducted in Malaysia, in which people who directly or indirectly linked to forex trading were asked to tell the advantages of this business. Following are the benefits according to the people.

Market Volatility and Liquidity

Volatility is the gauge of how much forex exchange rates or forex rates changes with time. Liquidity indicates the number of sellers and buyers in the forex market who are ready for trade at all times. To make it easier, the higher the liquidity in forex market, the bigger the number of completed trades. The forex trading is without the doubt the most liquid and largest of all the financial markets. The daily activity frequently exceeds 4 trillion US dollars a day; including about 1.5 trillion dollars in spot trading. It is on account of the volatility in this market that makes the traders capable of taking the advantage of forex exchange rate fluctuation or rise and fall for speculative reasons. Traders must be known that a higher or greater volatility means higher risk potential as well.

Liquidity and Market Hours

Forex market operates round the clock and for five days in a week. When the operational hours overlap in many time zones, the maximum liquidity occurs. It is vital to understand the relationship between market activity and liquidity.

Low Cost

Forex trading involves low cost. “Spread” is the cost in trading with most brokers. It is the difference between the asking price and the bid. Spreads are also applied in the stock market; however, the forex market has the advantage of much less or tighter spreads than spreads of stocks. In this way, forex trading has become the most gainful and cost-effective way of investment business not only in Malaysia but in the whole world.

Benefit of being Margin-Based Business

Most of the Malaysian brokers proffer you the margin-based business or trading accounts. These accounts are different from the regular credit-based accounts in a way that when one trades with the margin-based account, one has to open an account with their forex broker first and then they will fund their account by dropping money in it. When one has funded the margin-based account with the broker so he can get engaged in any of trading activities he wishes as long as he has adequate margin left over in his account. Leverage or influence makes it likely for one to trade the bigger positions. It means that the virtue of leverage provides better potential for the returns. The disadvantage is obvious that there will also a great potential of losing money and one can invite momentous losses in their account rapidly.

Potential Profit in spite of Market Direction

The selling of the derivative of a currency pair before you purchase it is known as the short-sale or merely a short. It is a child’s play to get entered into the short-sale while you trade in the foreign exchange market. With the intention to make profit or money on the short-sale, one must purchase the derivative of currency back for less than they received when they sold it. Their loss or profit will be represented by the difference. The capability of getting engaged in the selling of short-sale indicates that it is potential for one to make money or profit regardless of the ways the market is leaning toward. One can earn the money or profit if one purchase (go long) the derivative of the currency pair when the forex currency exchange rates or forex rates are increased and then put it up for sale for more than they had paid for it. One can earn the money or profit when forex currency exchange rates or forex rates are decreased, if one put the currency pair derivative on sale (go short), and then later purchase that for less than they had earned when they actually shorted the derivate of a currency pair.

Guidelines for Forex Trading in Malaysia

If you are interested in the forex business of Malaysia, then we have come up with the best tips and strategies to execute this trading.

Paramount Forex Trading Stage

There are a lot of available platforms for forex trading in Malaysia. Always choose the correct platform for you whether you are a newbie to this trade or an experienced in the craft.


This has been taking place from the olden times. Arbitrage is just like the speculation or assumption strategy in which a person attempts to gain profit or money from the market inefficiencies plus take the benefit of rate differences of the very same instrument whether on the same or different markets. To find the best conditions and apply the arbitrage approach is to some extent difficult because all the people in the forex market will be looking for this little dodge or loophole with the intention to make the profit.

Turn the Volatility in Favor

The foreign exchange market is the most volatile markets in all financial markets. One can easily turn this volatility factor to their own advantage with the assistance of specific trading strategies and plans, for instance, the low leverage, widening the targets, minimizing the risks, portfolio diversification etc.

Read the Interest Rates

To help the inflation and economy, the central bank tends to swing the interest rates. But these shifts have the massive impact and influence on the foreign exchange market and linked currencies.

Trade the Market Sentiment

The momentum or energy of the forex market is the market sentiment. All the traders whether big or small, are having an opinion while trading in the foreign exchange market. Some of them will be bearish and others will be bullish. All the opinions get combined and known as the market sentiment; even it includes your own opinion if you are trading on the forex market.

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