CFD trading, also known as Contract for Difference trading, is a service offered by most Singapore online brokers which enable individuals to trade on global financial commodities – currencies, indices, shares – without buying the underlying product.
This works because CFDs are derivatives based on the performance of an underlying asset. In other words, you make or lose money from changes in price movements of stocks or commodities instead of owning those securities.
Can you trade CFDs in Singapore?
You need to know that CFD Trading is just as legal as usual Forex Trading. Some people will argue that it’s even more legal because brokers must have a physical location where trades are executed. This means they have full EU-style regulation over their business and cannot operate from a lending agent’s address located in another country.
Furthermore, many regulatory authorities are involved, such as the MAS ( Monetary Authority of Singapore ) and ASIC (Australian Securities & Investments Commission), which oversee the banks and institutions providing CFDs for trading.
Since Financial institutions in the 1970s first regulated CFDs, it has been legally traded worldwide, with many successful traders making big profits from them. As of today, there are many CFD brokers providing brokerage services to Singapore traders. Although most of these brokers are only located in the UK and Australia, you can still easily purchase CFDs. This isn’t about whether or not CFDs are legal for trading, though; it’s just about pointing out that there is nothing wrong with trading CFDs in Singapore even though they might be regulated in other countries.
It’s just like how Forex Trading companies based in Cyprus had issues during the 2008/2009 Financial Crisis because this country was unregulated at one point. They’re regulated by ASIC (Australia) and CySEC (Cyprus), but people were worried since the companies have initially been from Cypress. The same goes for CFD brokers; they are regulated in countries with strict financial regulations, but Singapore’s oversight authority has made it clear that they legally cannot operate in Singapore.
This isn’t to say you should be worried about the legality of CFDs when trading. It depends on where your broker is based because you might accidentally trade with a criminal organization if you’re not careful. Always check up on your brokerage company before starting a business relationship with them!
How to trade CFDs in Singapore
First and foremost, before you open an account and begin trading with your broker, do your research on what platform is best suited for you. For example, if you are looking to trade stocks, then get an account with a brokerage that provides such services.
Secondly, once you have opened (and funded) your account, it’s time to select the assets you want to invest in. Your chosen platform should provide a list of available assets, which vary depending on your chosen market; Singapore traders may have access to thousands of assets, while European traders may only have the choice of a dozen or so. Generally, assets are grouped into currency pairs, commodities and stocks.
The next stage is to start trading. You can either pick an asset that you wish to trade on your own or follow other traders’ moves via social media (for example, Twitter). If you opt for the latter, it’s important to research whether the trader has any track record before following them – otherwise, you will be blindly following their lead which could prove costly.
CFD trading is a highly accessible trading instrument and can be used with a variety of investment strategies. Singapore has become one of the world’s largest financial hubs in the last few decades, and there are now over 100 forex brokers offering CFDs on currencies, indices and commodities. If you are a beginner and want to start CFD trading, contact a reputable online broker from Saxo Bank, who offers low commissions and excellent customer service, and start trading today.