Why Malaysian Traders Should Compare Forex Brokers?
Whatever level of experience you may have with Forex trading, you must choose the right Forex broker for your needs. The team at CompareForexBrokers can help you find the right broker to help you achieve this.
CompareForexBrokers can help you find the right broker by educating you on what each broker offers. This includes their pros and cons, the type of trading platforms available, trading tools, the spreads (or trading costs), and the trading accounts available. We also cover risk management tools, leverage, customer service, and the education the brokers might provide. Lastly, we cover broker safety and trust. With the right information, you can be sure that your broker is appropriately regulated for the security of your funds.
Foreign exchange trading is legal in Malaysia, with the Securities Commission Malaysia (SCM) responsible for regulation. Ideally, the broker you choose will be registered with The Securities Commission Malaysia (SCA-M) under the Capital Markets & Services Act 2007 (CM&S Act). Currently, very few major Forex brokers are registered to offer financial services in Malaysia. Most Forex traders will then need to trade via online Forex brokers. Being online, the broker may not have a physical presence in Malaysia. Hence, it is essential to choose a well-regulated broker with a good reputation.
The last factor we cover is the type of accounts suitable for Islamic traders since swap fees (also called holding fees or overnight charges) are prohibited in Sharia law since they are a type of riba. We can advise which brokers have swap-free trading accounts so you can trade knowing you comply with Islamic law.
As part of our Forex brokers comparison website, we have pages specifically for Malaysian traders as we realise the needs of Malaysian traders vary from those of traders from other countries.
Ensuring you have the right broker is the best way to avoid forex scams, reduce your trading fees and adopt the best trading software to meet your needs. We have broken down the nine factors to consider when choosing a forex broker.
1. Regulatory Compliance
The gold standard in Malaysia for a forex broker is to hold a Capital Markets Services License (CMSL) from the Securities Commission of Malaysia (SCM), which is the region’s regulatory body. This is overseen by the Bank Negara Malaysia, the country’s central bank. That said, only local brokers are licenced with the SCM with large well-established choosing to adopt tier 1 licenses instead. This includes the Monetary Authority of Singapore (MAS) and the Australian Securities & Investment Commission (ASIC).
All the brokers we recommend for Malaysian traders have at least one ‘Tier-1’ regulation and are well established to minimise the risk of a forex scam.
2. Spreads and Fees
The trading costs can add up due to the trade frequency of forex or CFD traders. Minimising brokerage, therefore, will greatly impact your long-term profit or loss situation.
The main trading cost is the spread. This is the difference between ask and sell price of the Forex pair and is expressed in pips. Generally the more exotic the currency pair, the wider the spread but this also varies based on the broker chosen. Spreads can either be commission-free (known as a Standard account) or RAW, meaning there is a commission in addition to the spread.
Other fees to be aware of when currency trading include inactivity fees, deposit and withdrawal fees and swap fees.
3. Trading Platforms
Each broker has their own suite of trading platforms that a trader can choose from. The most popular forex trading platform is MetaTrader 4 which is especially popular for algorithmic trading. Due to the platform’s popularity, they have the largest marketplace of bots (EAs), which can be purchased and executed on live or demo accounts.
MetaTrader 5 has more advanced technical analysis tools and a code base that is more structured toward trading underlying instrument prices such as share CFDs. TradingView is the fastest-growing trading software on the market with the best user interface and mobile app on the market. Other popular trading platforms include cTrader and TradingView.
Always check before you select a broker that they have the trading platform you want, and we recommend avoiding proprietary platforms. The reason is that if you are used to a trading platform like Plus500, it is difficult to charge brokers later as you need to re-learn the software.
Other things to look for in a platform include access to mobile trading so you can trade on the go with your Android or iOS phone. Copy trading and social trading tools such as with eToro.
4. Account Types
We recommend beginner traders choose the standard account (spread only). This is because it’s easy to calculate the profit/loss of trades and the brokerage is baked into the displayed spread. Beginner traders may also choose a mini account which allows trading with smaller positions (mini lot). Of course, trading smaller quantities reduces funding requirements limiting risk and potential losses.
The next option some brokers offer is a micro account, which, like a mini account, reduces the exposure to markets. A micro lot trader can trade just one-hundredth of a standard lot.
In Malaysia, many traders choose an Islamic forex account as it offers halal trading. This is also known as a swap-free account, as traders do not pay or receive interest rates. The transactions in Islamic accounts are Islamic finance-based and are executed without delay.
Finally, there is the RAW account (ECN account or STP account) which has a market-based spread and commission. We recommend this account for experienced traders as it has the lowest overall fees based on our testing by Ross Collins.
5. Leverage Options
Leverage is either set by the regulator or the broker themselves. For retail traders, this can be as low as 30:1 to 500:1. As a Malaysian trader, you will be asked to choose which entity of the broker you wish to trade with, as each entity uses a regulator. Regulators in jurisdictions such as Australia (ASIC), Europe or Cyprus (CySEC), and The UK (FCA) have top-tier regulation and lower leverage, while in other regions, such as South Africa (FSCA) and Bahamas (SCB) allow more generous leverage.
Leverage (also known as margin) is a requirement of forex trading as generally, the movements of markets are modest. While leverage trading increases your exposure to the markets, it also has high risk, so it should be used cautiously.
6. Customer Support
Customer service is underrated, as when you encounter problems (which occur more when trading forex compared to shares), you really need a fast and accurate response. We tested customer support primarily through live chat to ensure the agents at the other end were responsive and knowledgeable.
Traders should check the broker’s hours with the top broker offering either 24/5 or 24/7 support. Most brokers offer live chat, email, and phone. Getting quick, accurate answers can be the difference between a successful trade and a missed opportunity. Also, check if the broker offers support in your preferred language. This ensures clear communication and helps avoid misunderstandings.
7. Educational Resources
Education is power, especially in forex trading. A broker that invests in your learning is investing in your success. Look for a comprehensive range of educational materials – from beginner guides to advanced trading strategies. Webinars, video tutorials, and articles can provide valuable insights. Also, check if they offer demo accounts. These allow you to practice trading in a risk-free environment, building your skills and confidence before you trade with real money.
8. Market Access
Diverse market access broadens your trading horizons. A good CFD derivatives broker should offer a wide range of financial instruments to trade. This includes major and minor currency pairs when trading Forex markets, commodities like gold and oil, and indices. Some brokers also offer trading in etfs, cryptocurrencies and stocks.
Access to a variety of markets allows you to diversify your trading portfolio and vary your strategies, such as hedging your positions, reducing risk and increasing potential opportunities.
9. Deposit and Withdrawal Options
Smooth transactions are key to hassle-free trading. Look for brokers offering multiple deposit and withdrawal methods, including bank transfers, credit/debit cards, and e-wallets like PayPal and Skrill. Quick processing times and low fees are important factors. Also, consider the minimum deposit requirement. Some brokers have a $0 minimum deposit requirement while set minimum deposit levels of $10,000. This varies between brokers and can influence your choice, especially if you’re starting with a smaller trading budget.
Is it legal to trade Forex In Malaysia?
Yes, it is legal to trade forex in Malaysia so long as you trade with the Securities Commission of Malaysia (SCM) and Bank Negara, a Malaysia-regulated forex broker.
What is the role of Bank Negara Malaysia in Forex?
The role of the Bank of Negara Malaysia in forex is to regulate forex trading. As one of the most important regulatory bodies, Bank Negara Malaysia sets out a strict set of guidelines that forex brokers must comply with to trade in Malaysia legally.
Can you use MetaTrader 4 in Malaysia?
Yes, you can use MetaTrader 4 (MT4) in Malaysia. In fact, MT4 is the most popular trading platform as it offers superior execution speeds, advanced trading tools, and excellent mobile functionality.
Are you taxed for Forex trading in Malaysia?
Yes, taxes apply for forex trading in Malaysia. Just note that income derived from forex trading is taxed but capital gains are not taxed. Therefore, if you trade with a swap-free Islamic account and are not deriving an income from your trades, your gains should be tax-free.
Can you trade Crypto in Malaysia?
Yes, you can trade crypto in Malaysia, the financial regulator – Bank Negara Malaysia, does not recognise digital assets as legal tender or payment instruments.
Which is the most popular currency pair in Malaysia?
EUR/USD is the most popular pair for currency trading. Other popular pairs include USD/JPY, GBP/USD and AUD/USD. Major pairs have the highest liquidity and, therefore, the lowest spreads.