Forex Trading in the Philippines: How To Invest in Foreign Currency in the Philippines? Beginner’s Guide

Forex trading is one of the most widely marketed methods of making money online in the Philippines. According to estimates, the industry’s turnovers cross six trillion US dollars per day. Therefore, the market has more volume than the stock and mutual fund markets. However, even with the heavy trade volumes, forex trading is only just starting to gain traction in the Philippines.

More people are beginning to see the market as the right direction to look in terms of diversification. In this post, we’ll discuss forex trading in the Philippines in detail and how anyone can invest in this booming currency market.

At its core, forex trading is about buying and selling currencies. However, online forex trading, which is the focus of this piece, is slightly different. In the offline currency trading market, buyers and sellers exchange physical notes of the currencies they are dealing with. In the online trading scene, both buyers and sellers only make money by betting on one currency to rise or fall against the other.

The extent of the profits on each trade depends on whether the trader got the market direction for the currency pairs right or wrong.

A network of banks across the world’s major financial hubs controls the forex market.

The steps to starting forex trading in the Philippines include the following:

Learn the Basics

As with every financial market, there are tons of new terminologies and new technologies to learn before you can start forex trading in the Philippines. Some of the common terms you need to learn include:

• Base currency

• Quote currency

• Pips

• Bid

• Ask

• Spread

• Swap

• Commission

• Stop loss

• Take profit

• Leverage

• Margin

• Lot size

• Volume

The internet is a treasure trove of forex trading information. So, it’s easy to get grounded in forex terminologies.

You also need to learn the trading platform you intend to use. The bulk of them are easy to use, but for a beginner, they’ll take some getting used to. Check out a few video tutorials, and you’ll have a perfect understanding of how the platform you intend to use works.

Once you have a good grasp of the basics, your forex trading journey can fully begin.

Choose a Trading Strategy

In online forex trading, you need a robust trading strategy that will tell you when to sell or buy one currency against the other. The most successful traders have strategies that they have backtested for years or even decades.

Again, you don’t need to worry about creating a strategy from scratch. You can borrow strategy ideas online for free and mix them up to come up with a reliable system. Without a quality trading strategy, consistent success in the forex market is unlikely.

Apart from backtests, you need to trade with your strategy on a demo account for at least a month to be certain that you understand how it works and to also make sure the strategy works in live trading conditions.

Sign Up With a Reputable Forex Broker

To truly start forex trading in the Philippines, you need to find and sign up with a broker. Signing up is as simple as filling out your personal information and providing a personal ID. With your account approved, you can proceed to funding with your desired startup capital.

Start Trading

Once you have your account up and running, it’s time to put that trading strategy you’ve practiced extensively to work. Be sure to stick to the strategy long enough. It’s the only way to make sure it actually works.

You can invest in foreign currency in the Philippines in two ways: by becoming a money changer or by trading currencies online. We’ll look at the details below:

Becoming a Money Changer

You can invest in foreign currency by buying physical currencies that are in hot demand, such as the US Dollars and the Great British Pounds, and reselling them to buyers at a markup. You can also go the other route by exchanging the Peso for foreign currency. However, to start a money changing business, you have to navigate a few bottlenecks:

• Secure a location. You need to find a secure location that will form the base of your operation. There’s always the risk of robbery if you are in an area with little or no security.

• Fulfill all the registration requirements. To become a money changer in the Philippines, you need to register with bodies such as the Department of Trade and Industry, the Securities and Exchange Commission, and the Central Bank. You can’t establish your business if you don’t meet all the legal requirements.

• Secure trading capital. You’ll need at least P500,000 to start your business. This is not counting the cost of renting a space and equipping it.

Once you’ve successfully established your money-changing business, you can start investing in foreign currencies that have a favorable markup to the Philippine Peso.

If all of the above sounds like a lot of work to you, you can consider the alternative.

Online Currency Trading

You can invest in foreign currency online and make money by becoming an astute forex trader. The entry barrier is a lot lower. You only need a mobile phone or a laptop computer and your startup capital.

However, you should keep in mind that online currency trading isn’t really investing in the real sense of the word. For starters, you don’t own any of the currencies you’re buying or selling. You are only speculating on the directional movement of the currency pairs.

But it qualifies as an investment because there is the probability of making multiples of your initial capital if you’re a good trader with a decent understanding of market movements and market direction.

Go over the section on how to start forex trading in the Philippines to see how you can start investing in foreign currency right now.

As we mentioned above, you need to find a forex broker to trade forex in the Philippines. You need to be careful at this stage because your choice can make or mar your trading career.

On this front, Mitrade is the premier choice for forex traders in the country. The ASIC-regulated broker has years of experience providing the perfect trading platform for beginner and expert traders alike.

The company’s simple trading platform has made trading currencies, metals, and stocks super straightforward for traders in the country. The platform is intuitive, lightweight, and highly responsive. You can use the desktop version or mobile version without noticing any differences in the functionality.

You can choose a currency pair to trade, select your desired trade volume, set targets, and more with ease.

The highly responsive customer service desk is also on hand at all times to answer any queries that you might have about navigating the trading platform.

It doesn’t take more than a day or two of trading on the platform to agree that it is the best trading platform for forex traders in the Philippines.

The best time to trade forex in the Philippines is from 8 PM to 1 AM Manila time. This five-hour window is when the London and New York trading sessions overlap. Both financial hubs are responsible for a huge chunk of the transactions in the forex market. The markets are also at their most volatile during these sessions.

Therefore, trading around this window gives you a higher opportunity of netting short-term or intraday profits. Some day traders start scouting for opportunities at the start of the London session (which is around 4 PM Manila time) and close out all open positions at the end of the New York trading session (which is around 5 AM Manila time).

However, you should keep in mind that the forex market operates round the clock, five days a week. Therefore, you don’t have to trade at a specific time window unless you are a day trader with a short-term strategy. Day traders try to find profitable opportunities around the time when the markets are the most volatile.

Traders with a long-term strategy (also known as swing traders) can open trading positions at any time and hold them for days or weeks. For such traders, there’s no best time to trade forex in the Philippines.

Is Forex Trading Taxable in the Philippines?

Forex trading is taxable in the Philippines. The country’s tax office, the Bureau of Internal Revenue (BIR), classifies any gains from forex trading as “ordinary income.” Thus, as a forex trader in the Philippines, you need to register as a self-employed person or as a professional and ensure you submit your tax returns.

The tax ratean be as high as 35%, depending on your gross income at the end of the year. You need to keep a copy of your trading history for each tax period to avoid any mistakes in filing your returns. If the tax office determines that you have failed to comply with your tax obligations, you may be hit with penalties.

If you’re unsure about your tax bracket, it’s best to talk to knowledgeable tax professionals.

Is Forex Trading Allowed in the Philippines?

Forex trading is allowed in the Philippines as long as you’re trading with an offshore broker. The Philippines’ Securities and Exchange Commission (SEC) announced a ban on forex trading in the country to make it harder for fraudulent businesses and brokers to secure legal backing. They took this position after numerous reports of fraud and heavy losses from the public.

Thus, if you want to safely trade forex in the Philippines, you need to find a reputable international online broker based outside the country like Mitrade. It’s important to choose a reputable broker because that’s the only way to ensure you won’t have any problems with your trading. Remember, you won’t have the SEC to report to if you have an issue with an offshore scam broker.

Can You Trade Forex With $100?

You can trade forex with $100. Brokers like Mitrade offer leverage up to 1:200 for certain currency pairs. This means that your $100 can control up to $20,000 in trading volume. However, it’s important to be realistic about the returns you can expect from such trading capital.

Some forex traders chasing outsized returns take the full leverage available to make the most of their small trading capital. However, since leverage swings both ways, there’s a high probability that such traders will receive a margin call and lose their accounts.

Savvy traders with small capital exercise caution with the level of leverage they take on. They also patiently grow their accounts in increments over the long term instead of chasing huge profits over a few weeks or months.