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Why to Trade Forex in UAE?

Forex trading is one of the fastest ways to grow your wealth, and with the help of technology, almost anyone can trade in Forex with minimal setup and hassle, even from the comfort of their homes.

The United Arab Emirates (UAE) has a strong presence in international financial trade, thanks to its economic power. It hosts the Middle East’s financial hub, Dubai and Abu Dhabi, which boast of the largest concentrations of local and international forex brokerages in the Middle East.

If you’re new to forex trading in the UAE but want to learn the basics, then this guide is perfect for you. We educate you and recommend the best brokers and trading apps. But if you are an experienced forex trader looking for a new broker, you can only view our list of the best forex brokers in UAE.

 

While it can be very profitable and people can earn a lot of money via Forex in a short time, it also comes with a significantly high risk that you should not ignore. Forex markets are very volatile, hard to predict. Therefore, the possibility of losing a part or all of your capital is always present.

Best Forex Brokers in UAE

We help UAE-based forex traders ̣– both beginners and advanced traders – to identify the best trading brokers and tools for their needs.

Here are the factors we consider when rating a broker:

  1. Safety & Security ✅
  2. Asset availability ✅
  3. Spread ✅
  4. Transaction and inactivity fees ✅
  5. Industry Reputation ✅

Forex.com is a global FX and CFD broker founded in 2001 works in over 180 markets. The parent company of Forex.com is GAIN Capital, which is based in the US and listed on the New York Stock Exchange NYSE:GCAP.

Forex.com offers a wide range of products such as Stock CFDs, Forex, Commodities, Indices and Crypto CFDs.

Check Forex.com Full Review
 

Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% 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.

XTB’s started in 2002 as X-Trade. In 2004, it merged into XTB group. Currently, X-Trade brokersDM SA in Poland, is one of the biggest Forex and CFD brokers listed on the Warsaw stock exchange. They have offices in 13+ countries, including Poland, the UK, France, Spain and Germany.

Though XTB’s market doesn’t match those of bigger platforms, it outdoes them in crypto trading. Moreover, they run proprietary trading technology that provides traders with quick and reliable trading speeds, full transparency on trades, and no requites.

To affirm their position, they received the ‘Best Trading Platform’ award in 2016 and was voted the top-rated Forex and CFD Broker in 2018 in the Wealth and Finance International Awards.

Check out XTB Full Review
 

Trading CFDs on leveraged basis involves a significant amount of risk

Libertex has been a well-established broker since 1997 and has Headquartered in China, Armenia, Azerbaijan, Belarus, Spain, Cyprus, Ukraine, and the United States. The name Libertex forex broker is a trading name for Indication Investment limited, a subsidiary of the fore Club Group.

The club gives you the ability to trade CFDs, and their platform is ideal for both the beginner and the experienced professional trader.

Check out XTB Full Review

ICM Capital is a well-known international online Forex and CFD trading firm offering traders an access to a wide range of trading products including foreign exchange, commodities, futures, stocks and indices.

Check ICM Capital Full Review

Swissquote is a Swiss investment bank established in 1996. Listed on the SIX Swiss Exchange (symbol: SQN) since May 29, 2000. The Swissquote Group  headquarter is located in Gland (VD) and offices in Zürich, Bern, London, Luxembourg, Malta, Dubai, Singapore and Hong Kong.

Swissquote MEA Ltd. is a subsidiary of Swissquote Bank SA based in Dubai, UAE and has an office in the DIFC (Dubai International Financial Centre).

Check Swissquote Full Review

Equiti Group Ltd is a global broker for trading Forex, shares, indices and commdities.

Equiti offers its clients access to various resources to help them with their trading journey.

With offices located in the Middle East, Europe, Asia, Latin America and Africa, Equiti offers Forex traders with competitive prices and spreads.

Check Equiti Full Review

Get a free consultation
with top class experts

If you are new to trading and unsure where and how to start, you can connect with one of the Forex professionals and have a discovery chat.

It’s completely free with absolutely no commitments to work with them in the future.


What to expect from the discovery call?

The professionals will explain to you about the forex market, make sure you understand risks and opportunities and guide you through the entire process until you make your first trade. Moreover, they will provide you with the needed support throughout your entire trading journey.

The consultation, guidance and support are completely free. You will never be charged or asked to pay at any stage of the process. This is intended to help traders, guide them and provide them with any support they need.

Forex Trading in UAE Guide

 

How Do Nominate the Best Forex Broker in UAE?

With so many Forex brokers out there offering different services, how do we choose the best and separate from the others? We used the following criteria to select the best Forex brokers in UAE:

 

❖ Regulations

The first and the most important thing is security, the broker’s credibility, and the protection of your money. Our number one priority is to research whether the broker is regulated or not and where it is regulated from.

 

❖ Ease of Trading Platform

Every broker provides its traders with a software platform that is used for trading Forex. Our selected brokers provide platforms that are simple and user-friendly. There are some trading platforms that are complex, overwhelming and requires a certain system configuration. We avoided brokers with such platforms.

 

❖ Fees & Overnight charges

Some brokers charge fees on opening trades, or they charge you for keeping your trades open for long periods (overnight or swap fee). Try to choose brokers with minimum to no trade fees. Our selected brokers are researched carefully and well-reviewed from trading cost perspective.

 

❖ Deposits & Withdrawals

We always look for brokers that are known for their easy deposits and withdrawals process. The last thing we want our readers to go through  is depositing their money and waiting for a long time to sight their fund in the trading platform. Also, we avoid brokers that are know to make their users wait for a long time to get their money back after a withdrawal order.

 

Is Forex Trading Legal in UAE?

Yes, currency trading is legal in the UAE!
The Central Bank of the UAE regulates the forex brokers, while the Securities and Commodities Authority (SCA) issues trading licenses.

That said, you are safe if you work with regulated forex brokers.

 

The Concept of Forex Trading

Forex is an acronym for foreign exchange, often abbreviated as FX. Subsequently, forex trading is the buying, selling and exchanging of currencies at specified prices.

Since every currency in the world is included in the foreign exchange market, there is no trading floor or official foreign exchange location. Thus, the foreign exchange market is a decentralized market, unlike the stock market with physical exchange locations.

The forex market is the biggest in the financial markets as central banks and governments, too, trade currencies to stabilize and control their currencies. So naturally, such huge institutions have the war chest to trade currencies for millions of dollars at any time, which explains why the market achieves over $5 trillion daily turnovers.

 

Exchange Rates & Currency Pairs

Forex traders exchange every currency. And since the market is globally decentralized, the trade can happen anywhere, be it online or over-the-counter. But, regardless of the location, the market forces of demand and supply determine the exchange rates for every currency.

When talking of forex traders, we imply the day traders’ goal is to profit from the price discrepancy between two currencies.

Every currency is available on the FX market, but most traders only use a few pairs because most currencies are volatile. A single event, whether a natural disaster or political decision, can affect the whole market. That’s why traders pay close attention to the news and have an in-depth understanding of international relations.

Forex traders exchange every currency. And since the market is globally decentralized, the trade can happen anywhere, be it online or over-the-counter. But, regardless of the location, the market forces of demand and supply determine the exchange rates for every currency.

When talking of forex traders, we imply the day traders’ goal is to profit from the price discrepancy between two currencies.

Every currency is available on the FX market, but most traders only use a few pairs because most currencies are volatile. A single event, whether a natural disaster or political decision, can affect the whole market. That’s why traders pay close attention to the news and have an in-depth understanding of international relations.

 

Group of Currency Pairs

Forex trading relies on the exchange rates, which explains how much one currency is worth another currency. So it’s to say; trading forex is exchanging the correlation between a currency pair, e.g. American Dollar (USD) is weighed against the United Arab Emirates dirham (AED).

Currency pair is the standard as to how to represent correlations between currencies. We use the official currency abbreviation, separated by a forward slash (/). Examples include:

  • AED/USD – weighs the United Arab Emirates dirham against the American Dollar.
  • EUR/USD – weighs the Euro against the American Dollar.

When pairing these currencies, the foremost symbol represents the base currency. On the other hand, the symbol that comes after the forward-slash is the quote currency.

Like in our examples above, the American Dollar is the quote currency for the United Arab Emirates dirham and the Euro, which both take base currency roles.

Currency pairs help you know the value of a home currency compared against a foreign currency.

With that being said, no forex trader trades every currency in the world. Instead, most limit themselves to a handful of currency pairs. We categorize these pairs into three groups based on their stability and international influence. The groups include:

  • Major pairs
  • Minor Pairs
  • Exotic Pairs

Major Pairs

 

Major currency pairs are any pair that includes the US dollar (USD). So, in the UAE, AED/USD could easily fall in this category. However, officially, there are only four main major pairs. They include:

  • EUR/USD – Euro and US dollar
  • USD/JPY – US dollar and Japanese yen
  • GBP/USD – British pound sterling and US dollar
  • USD/CHF – US dollar and Swiss franc.

Other equally popular options widely considered to be members of this category include:

  • AUD/USD – Australian dollar and US dollar
  • USD/CAD – US dollar and Canadian dollar
  • NZD/USD – New Zealand dollar and US dollar

These seven major pairs are the most liquid, and hence, the most traded in the market. Together, they account for 75% of all forex traders globally. Also, they have the tightest bid (buy) and ask (sell) spreads, which will tackle /shortly.

Though, among the seven, EUR/USD remains the most traded, recording the biggest daily turnover. As a result, the pair is the easiest to analyze and the most attractive choice for institutional traders.

 

Minor Pairs

 

Minor currency pairs include any currency among the seven major pairs, excluding the US dollar. They are constituted by a combination of any of the following against other currencies:

  • Euro (EUR)
  • Japanese Yen (JPY)
  • British Pound (GBP)
  • Swiss Franc (CHF)
  • Canadian Dollar (CAD)
  • Australian Dollar (AUD)
  • New Zealand Dollar (NZD)

 

Exotic Pairs

 

All other currencies form what we call exotic currency pairs and is by far the largest category. Though this is the most complicated for traders, there are not always sufficient data to back predictions. For example, it isn’t easy to analyze the dirham against the Swedish Krona (SEK) or Turkish Lira (TRY) than against the US dollar.

Though forex brokers offer you many exotic pairs, when trading forex in UAE, you should stick with majors and minors. Unless, of course, you are dealing with a home currency.

 

Leverage, Spreads and Margins in Forex Trading

Leverage, spread, and margin are the most important concepts to understand before you jump into trading forex. So, let’s take a look at them individually.

 

Spread

 

Spread is the gap between the bid and the ask prices.
If you open any trading platform, you will see two prices, bid and ask.

The “Bid”, also referred to as “Sell”, is the price at which you will be “selling” your position at.

The “Ask”, also referred to as “Buy” is the price at which you will be “buying” a position at.

In other words, as per the above image, when you want to buy the EUR/USD pair you will be paying 1.19065, while if you wanted to sell it, you will sell it at 1.19061.

The difference between the buy and sell, or ask and bid, is the spread, and this is how brokers make their money.

In our example, the difference between ask and bid is

1.19065 – 1.19061 = 0.00004 pips.

Do remember that on EUR/USD pair, the pip value is identified as the 4th digit after the decimal, which makes the spread 0.4.

Note: Always search for the tight spreads to maximize your profitability.

 

Leverage

 

If you are not so new to Forex trading, then you’ve probably heard the old cliche “Leverage is a double-edged sword!” Some traders say, “Leverage is a two-way street.” What do they mean? Hold that thought.

Leverage enables you to control your broker’s money to complement your investment and improve exposure to increase your profit in each trade. Technically, it is a loan from your broker.

For example, let’s assume that the broker offers a leverage of 1:100. Now to trade a $10,000 worth of position in EUR/USD, you need to deposit only $100 to your account. Leverage enables you to control $10,000 with merely $100.

Now let’s assume that the price of EUR/USD went up from 1.19 to 1.20.
Then, for every dollar you invested you would make 1 cent., and since you are controlling a $10,000 worth of position, it means your profit is 10,000 cents ($100) profit for $100 invested.

In this case, your return on investment is 100% (a profit of $100 on $100 invested). And this is the main advantage of leverage.

 

Margin

 

Margin is the minimum amount of money you need to open a position with your broker. It’s usually expressed as a percentage of the full position. Like in the example, for the $10,000 for a $100 investment, the margin here is 1%.

Most forex brokers have between 0.25% to 2% margin. When choosing your broker, it’s an important consideration as it helps you tell the maximum leverage you can wield with a trading account.

 

UAE Laws for Forex Brokers

As already mentioned, the Central Bank of UAE, in conjunction with SCA, have a set of provisions to ensure only forex brokers that offer high-quality, fair and transparent services get licensed. Among these requirements are:

  • The intermediary should be locally-owned, with at least 60% of paid capital coming from the national shareholding.
  • The minimum capital range is one to three million dirhams.

That’s, however, not to say that the country prohibits offshore brokers. These brokers need a domestic representative and must prove their liquidity.

SCA ensures the registered Forex brokers UAE are compliant and maintain fair and honest business practices. It does this to protect traders and improve the overall financial markets.

 

How to Start Trading Forex in UAE?

Some people trade forex in UAE to grant extra income. But of course, just like elsewhere globally, some traders do it as their primary source of income. So what’s important is to sign with one of the forex brokers registered with the CB of the UAE.

Here is a step-by-step guide on how to start trading forex in the UAE:

 

Learn Trading Methods

Before you start trading, you need to learn how to trade, identify your trading methods, and develop your strategies.

The three methods to trade forex include:

  1. i) Currency Pairs: It’s the traditional way of trading currencies. But you need a broker company that acts as the link between you and the decentralized forex market.
  2. ii) Contract for difference (CFDs) – This is a trading method that involves derivatives based on the underlying assets. Most forex brokers in the UAE that we recommend on here offer CFDs.

First, find a forex broker. However, the choice of your broker depends on trading methods and strategies. So, before we look at how to find your broker, let’s look at trading methods.

iii) Spread betting: The method uses a forex derivative but requires traders to predict whether the value of a currency pair will rise or fall within a specific period. But this is an option mostly offered by offshore forex brokers as it’s mostly deemed as betting, which is haram (forbidden) in the UAE.

You decide how you want to trade forex before picking your broker because each broker specializes in a specific way of trading.

 

Identify Your Forex Trading Strategies

You now have your trading methods, but you must also get your strategies right. There are many trading strategies that you can incorporate. They include:

 

Day Trading

 

Day trading is not a get-rich-quick scheme. Rather, it’s an approach to trading financial instruments. A trader opens a position and closes it on the same day to take advantage of the volatile market movements. The trader often holds the position for only a few minutes and closes it.

Consequently, the frequent but small market changes make it tasking and require special skills. Most entrants lose money in the long run.

 

Swing Trading

 

Swing trading employs the same principles of day trading, except that the trader extends the duration of holding a position from a few minutes to a few days or weeks.

You get the advantage to do some market analysis and study price movement trends. As a result, it’s a lot easier to master than day trading. But it’s not to say forex swing trading is not without risk.

On the rear side, most brokers charge you a fee when you keep a forex position overnight, which is called “swap” fee.

 

Long vs Short Trading

 

If you have traded stocks, then you’ve heard long and short trading.

When you buy a currency pair with the hope to sell at a higher price in the future, that’s long trading.  On the other hand, if you sell a currency pair in anticipation of a fall in price, that’s short trading.

In simple terms, you hold a long position, your trade makes a profit with the rise in the price, but for a short position, your trade makes a profit when the price falls.

In forex trades, you take a “long” position with one currency and “short” with another when you open a trade.

 

Read more: What is CFD contract for difference?

Warning: Trading CFDs on a leveraged basis involves a significant amount of risks

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