FX Singapore: Different Types of Orders

There are two ways that you can trade. One is simple buying and selling of currency pairs that the FX Singapore dealer offers. You go long (buy) one currency and short (sell) in the other currency in the pair. The second way is to trade in derivatives that have a specific currency pair as the underlying asset. Both these techniques are similar to what stock traders use on daily basis in stock markets.

However, the simple buying and selling of currency pairs is more common; most new traders are relatively unfamiliar with the way derivatives are traded in FX Singapore. One buys or sells a currency pair in the hope that the exchange rate of the currencies in the pair will move favourably to the position taken in the trade. For example, a long position in AUD/USD pairs yields profits when the exchange rate of the Australian dollar goes up in relation to the US dollar and a loss if it goes down. The exchange rate will rise when the value of the AUD dollar increases against the US dollar, which means that the bet is on the Australian dollar.

Here again, while initiating a trade in a FX Singapore account a trader may place a market order or a limit order. A market order is executed at the current prevailing price quoted on the FX Singapore trading platform. A limit order on the other hand signifies a specific price at which the order should be executed.

You also have the option of placing a take-profit order with the FX Singapore dealer. This means that your open position will be automatically closed once the price moves up to the specified level. Similarly, you can place a stop loss order to protect yourself against sharp downward movement in price.

The Uniqueness of FX Trading

In the FX market you are not really buying or selling anything even if on the face of it appears that you are buying one currency and selling another. It is basically a speculative market and there is no transfer of ownership of any currency in any case. Trades are simply accounting entries and profit or loss is netted or calculated on the basis of market price. A trader’s account is credited or debited in the currency in which it has been denominated. For example, even if the exchange rate of EUR/USD is quoted in US dollars, an Australian dollar denominated FX account will be credited in AUD.

The existence of FX market is basically for the purpose of facilitating exchange of currencies for exporters, importers and other trade related international transactions including payroll and mergers and acquisitions. However, trade related needs for foreign currencies amounts to only about 20-25 percent of the daily turnover in the FX market. Such transactions are in the domain of large banks that buy or sell foreign currencies on behalf of their clients. The rest is all speculative trades initiated by multinational banks, large financial institutions, hedge funds and even high net worth individuals. In fact, the FX market opened for the small individual investor only recently, thanks to the Internet.

In essence, when a trader initiates a trade, he is actually buying one currency and selling another because currencies are traded in pairs. If a trader buys a standard lot (equivalent to a hundred thousand units) of AUD/USD, he is essentially exchanging USD for AUD. It is almost similar to exchanging cash for, say, a laptop except that no transfer of ownership is involved in FX trading. However, the transactions may only be accounting entries the effects are as real as any other trading activity.

Tips for Trading in FX in Singapore

Singapore is one of the leading exchanges where FX trading is very popular. FX in Singapore has become extremely popular due to the value of the currency and the time zone specifics too. When you are looking at FX in Singapore, there are a few things that you should keep in mind.

Research and analysis is the one thing that you cannot do without if you are trading in FX in Singapore. It is necessary that you learn to use the proper technical analysis to be able to make better predictions in FX in Singapore.

There are also various kinds of tools and plans that are available when you trade in FX in Singapore. These tools can be found on the various trading platforms that are available. These trading platforms have charts and analysis data that can be created easily at the click of a button. Some of the features that you may get include indicators, customizable charts and price alerts.

The other thing that is extremely important for FX in Singapore is to be able to manage risk and stop loss when you have to. Discipline and planning is the best way to ensure that you do not make decisions that are based on emotions; something that leads to maximum mistakes made in FX in Singapore.

Following the news is also very essential if you want to be able to understand fundamental analysis and create some of your own as you go along. This is the kind of analysis that will help you in making great long term investment plans too.