Evaluating the merits, demerits, and risks associated with forex trading in Malaysia

Forex trading in Malaysia is an appealing financial topic and has become extremely popular in recent years, coming more under regulatory scrutiny. While many international forex brokers accept Malaysian forex traders, many forex trading platforms are being established in the country with a Capital Market Services license provided by the Securities Commission of Malaysia (SCM), a leading financial regulatory body in the country.

Nevertheless, several merits, demerits, and risks are involved while trading with foreign currencies in Malaysia, which is present in every form of trading and every part of the world. Those interested in forex trading in Malaysia who find the forex market appropriate and appealing must measure the pros and cons before getting involved. While forex trading is a potentially profitable activity, it carries several risks and uncertainties. 

Here are a few merits, demerits, and risks associated with forex trading in Malaysia –

Merits of Forex Trading

Several merits of forex trading that can help you in the long run include: 

• Large Market availability

Regarding forex trading in Malaysia, the sheer scale and size of the market sit at the top of the list of forex trading benefits. The forex market is expansive and the largest in the world, with more than $6 trillion daily trading volume. Other important factors that make forex trading in Malaysia a lucrative activity can be largely derived from the size of the forex market. Malaysian forex trading allows its investors and traders to access international currency markets that offer an additional opportunity to diversify investment portfolios and make great profits from the activity. 

• Best Regulatory Environment

The forex market is popular in Malaysia and every corner of the world in a digital and global landscape, making regulation difficult. For this reason, strong financial regulatory bodies are required to monitor the activities that take place in forex trading via chosen forex brokers. Independent bodies like the Securities Commission of Malaysia regulate forex trading activities in the country. The institution ensures that every forex broker in Malaysia is licensed, well-regulated, and follows strict rules and guidelines that safeguard the interests of Malaysian forex traders using their financial services. Hence, although forex trading involves an element of risk, similar to all forms of trading, using a Malaysian forex broker gives peace of mind that the trading activities are fair, tightly-monitored, and regulated, thereby providing additional protection to the traders and boosting their trading confidence.

• Flexibility for all Traders

Forex trading provides adequate flexibility to traders as there are no restrictions on the number of funds used for trading. This, combined with the forex market operating 24×7, creates a lot of flexibility for traders. Even people with regular jobs can indulge in this activity at night or on weekends. Unlike forex trading, trading in bond or stock markets is not flexible since the markets are open only during specific hours. Additionally, forex traders in Malaysia can choose from a range of currency pairs to trade on different time frames ranging from short-term position trading to long-term scalping.

Forex markets around the world offer the maximum leverage among all financial markets. The arrangement in the forex market allows traders to leverage original investments by as much as 20 to 40 times to trade in the market. High leverage magnifies both gains and profits. Although the movements are typically small in the forex market, traders lose or gain substantial funds due to leverage. Malaysian forex traders can use leverage to increase their returns and trade larger positions with smaller amounts of money.

Demerits of Forex Trading

While there are some merits of the foreign exchange market, there are also some demerits which include the following: 

• The Complexity of Tax Laws

Malaysia is known to have complicated tax laws that make forex trading quite challenging as traders fail to understand the country’s tax obligations. Hence, Malaysian traders must seek financial advice from professionals and experts to comply with all the country’s import tax laws. 

The forex market is undeniably a highly volatile market, not only in Malaysia but in every country. High volatility leads to significant fluctuations in currency prices in very short periods. This volatility factor leads to substantial losses if the traders and investors have little knowledge of the forex market or do not pay enough attention to the forex market stats and analysis.

• Complexity nature of Forex

Forex trading is the most complex version of all sorts of trading activities and requires a certain degree of experience and knowledge. Beginners take time to learn the different aspects of forex trading, including how to trade foreign currencies successfully to see profits. In addition, there are different risks involved in forex trading, such as market currency risk, counterparty risk, and leverage risk. Apart from this, there is always a risk of making mistakes while trading foreign currencies for the first time.

Risks of Forex Trading

There is always risk associated with forex trading; look out for the bellow mentioned risks before beginning trading:

As with any form of trading, forex trading involves trading in foreign currencies that comes with the risk of the currency value moving against the position of the traders. This may lead to significant losses if the traders are not careful and do not pay attention to the forex markets and currency prices.

In every financial transaction, the business or company that deals the financial assets with interested traders is called the counterparty. Often, the counterparty may fail to deliver their part of the deal, leading to defaulting risk called counterparty risk. Hence, there is always a risk involved in trading forex in Malaysia if the counterparty defaults on a contract or goes bankrupt which can lead to potential losses for the traders.

An initial investment, called margin, is required to conduct Malaysian forex trades in forex trading. Because of fluctuations in currency prices, there can be margin calls that the investors have to pay as margins. When the forex market is highly volatile, using leverage aggressively can lead to substantial losses even with a small initial investment. 

Conclusion

Forex market trading in Malaysia involves a level of speculation and a multitude of national and international factors, which makes trading risks inevitable. The volatility of leveraged trading, political issues, and time differences are only a few examples of trading risks that can lead to big losses. However, keeping the disadvantages and risks aside, forex trading in Malaysia can be used to build a career as there is the freedom to trade remotely and autonomously given connectivity, adequate risk capital, a trustworthy forex broker in Malaysia, and, most importantly, the required amount of knowledge and experience. 

It is possible to make profits by a trading minor, major, or exotic currency pairs in the forex market in Malaysia. Trading in Malaysia provides traders access to fascinating and sizable forex exchanges and an economy with rising GDP. Apart from the minor disadvantages, many traders in Malaysia believe forex trading to be worth trying by overcoming the risks and increasing trading activities and chances in the country.