Necessary Checklist to Ensure Profit from Forex Trading in Dubai

Forex trading in Dubai is emerging as a major business activity for institutions and corporates as the city is flush with funds generated as a business hub. Apart from good oil reserves and the presence of free-zones facilitating a lot of import-export, the region is surely among the most coveted destination for business persons and entrepreneurs.

Forex Trading in Dubai: Where to Start

You are at the right place, if you are planning to launch your forex trading business from Dubai. Here, you can choose from a host of international and local forex brokers, all regulated by the Central Bank of the United Arab Emirates (UAE) and the Securities and Commodities Authority (SCA). You can also choose from companies regulated by the Dubai Financial Services Authority (DFSA). The brokers here can meet all the requirements from you, including swap free Islamic accounts.  You can be assured your trading operations are starting in a legally strong and well regulated environment and thus there is no reason for worry.

But, you shouldn’t lower your guard and must carry out a thorough check before selecting a broker and start trading. Let’s understand what all you need to be aware of before taking your first step towards forex trading profits in Dubai.

Business Plan:

Forex trading is like any other business and need a comprehensive plan from the start, to be successful.  A business plan should describe your total risk capability, return expectations, risk-reward management, trading strategy, psychological preparedness, and technological support, apart from the usual components of a normal business plan.

This is because trading is a very specific business with its own peculiar characteristics and you should do a lot of background research to ensure all the components are in place before starting the business; better avoid regrets at a later stage.

Demo Account

All reputed forex brokers provide demo accounts for you to practise trading in MetaTrader platforms. MT4, MT5 platforms or MetaTrader platforms are the standard platforms provided by all reputed brokers. They are very trader friendly with an intuitive interface.

Start a demo account with a forex broker, download the MetaTrader platform and try placing a few orders. As your demo account will be pre-funded with virtual money, you can easily place orders without any hindrance. Check out the charting interface and technical analysis tools which consists of various indicators like ATR, Moving Averages, Stochastic Oscillator, Trend lines, etc.

Fig: Example of a MetaTrader interface.

For an advanced level trader, you can check out the strategy testing options, advanced charting features, and integrate it with your trading systems.

Pick a Good Forex Broker in Dubai

There are a lot of currency trading brokers in Dubai and most of them are regulated and follow good practices. Nevertheless, it is important for you to be aware of the pitfalls.

The first aspect is to check while shortlisting forex brokers are, of course, the regulatory approvals. Your broker should be regulated by the authorised government agency and they should have met all the regulatory benchmarks set by the various regulatory agencies in Dubai.

An international forex broker in Dubai should be regulated by authorities like U.K.’s Financial Conduct Authority (FCA) or Cyprus’ CySEC which oversees trading operations in the EU’s Markets enforcing Financial Instruments Directive. If you are trading through a local broker, ensure they have the necessary permissions from the SCA or the DFSA.

Also, bear in mind the difference between an ECN broker and a Market Maker. ECN brokers provide the best bid and offer from the market makers and try for the best possible execution at the available prices. They might charge you a commission for executing the trade.

A Market Maker execute your order but might take the other side of the trade. This can cause a conflict of interest as your profit can be the Market Maker’s loss.

Can You Buy 100,000 Dirhams Worth a Currency With 10,000 Dirhams?

Yes, all the forex brokers worth their salt would strive to provide you the capability to take a large position with a little upfront deposit. The amount thus required for taking a position is called Margin and the facility to take a large position with a much smaller amount of money is called Leverage.

For example, if you have kept 100,000 dirhams as a deposit with your currency broker and if you are able to take 25, 00,000 dirhams worth Sterling Pound, then the leverage is 25 times.

It is essential to select a broker who provides good leverage to develop a viable trading business, it is as simple as getting the maximum bang out of the buck.  But, always remember, leverage is a double-edged sword, a facility which can magnify your profit and also the losses. Irresponsible use of leverage can result in disaster and total wipeout of your trading fund. You should have a clear strategy, as said earlier, for measuring the required leverage.  Leverage is usually determined on the basis of existing volatility in the market, which you should be also mindful of. It is advisable to have a lower market exposure in times of heightened volatility.

How the forex broker makes money?

It is important that you understand how your forex broker in Dubai and elsewhere makes money. Instead of a commission, most brokers make money from the difference between the bid prices and ask prices, also known as a Spread. Hence, a broker who provides a tight spread will be always beneficial for you.

Trade Execution

Your trading profits can take a beating if your broker is not good in ensuring decent execution of your orders. If the order gets filled with a large difference against you, it is called a Slippage and can slowly push your trading to death through a thousand bites. You cannot afford to have shoddy execution from your broker and this should be a prime concern while finalising your broker.

Also make sure that your broker provides you with more than one channel for trade placement as relying on a single medium, like internet, can backfire in times of systemic problems.

 

Open a Forex Account

Once you have finalised a broker in Dubai, start a live funded account with them. A key point at this stage is to remember that your experience using a demo account and a live account will be same, but for one. Your emotional experience while trading with your own cash will be different, your behavior will not be same as when you traded using a demo account. This is because of the emotional attachment to the hard-earned money, and the market can trigger emotions like greed and fear in you, much to the detriment of your trading performance.

But, ships are built to sail and there is a limit to which you can stay off from taking risks in your life. Embrace risks, manage risks and drive your profits.

To understand more about the trading techniques, risks and rewards, make use of our educational tools. We can guide you in every step of your trading journey. If you would like to start an account with us, let us know and we will be there to help you through out.

Your forex trading venture in Dubai will have a great future…all the best.