Forex Trading In Bangladesh

What Is Forex Trading?

The process of buying and selling of currencies in an over-the-counter market with profit-making intentions is called forex trading. Forex market is the world’s largest financial market with a daily trading turnover of more than $6 Trillion U.S. Dollars. Forex trading in Bangladesh is legal as long as traders deal with authorized brokers and/or moneychangers. 

Read: Best Forex Brokers in Bangladesh

How Does it Work?

Forex trading involves selling or buying of one currency against another. Traders currencies in pairs. A pair always have a quote currency appearing after the base currency, i-e, BDT/USD, BDT/GBP, USD/JPY, etc. 

The quote currency in a pair represents the amount required to buy/exchange one unit of the base currency.  For example, if a currency pair is quoted as USD/BDT – 84.79, then it means that you need to spend 84.79 BDT to buy 1 USD.  

The forex market is highly volatile and prices move frequently. Speculators always keep a close eye on the forex market to spot a trading opportunity. The value of a currency pair appreciating in near future yields profits with a buy trade and vice versa. 

Let’s try to understand the concept of forex trading with an example;

Suppose you consider trading the USD/BDT pair with 10,000 BDT available in your trading account. Your broker quotes the current market price of USD/BDT as 84.79. That means you can buy 117.93 USD i-e. 1000 BDT/ 84.79 = 117.93 USD.

You perform trading analysis and it indicates an expected increase in the USD/BDT from 84.79 to 100.00 in near future. In the aforementioned scenario buying the pair at current market price can be profitable. 

Now consider if you don’t buy the pair in the aforementioned example and the price moves to 100, so you buy USD at a higher price. i-e, 10,000 BDT/ 100 = 100 USD and when you liquidate (close) your trading position, the price is again at 84.79, resulting in a loss of 117.93 USD.

Pros And Cons of Forex Trading 

Some main pros and cons associated with the forex trading business are listed below;

Pros

  • Leverage – Leverage allows traders to enjoy more market exposure with limited capital. It helps small-scale traders to trade bigger volumes with low investments. Generally, traders can use a leverage of up to 1:30 with regulated brokers. However, some brokers allow traders to use a leverage of up to 1:000 or even beyond. 
  • Decentralized Market – The forex market is a decentralized entity. Therefore, the chances of price anomalies are minimal. Also, there are no hard and fast rules to follow that makes the forex market flexible for all types of investors. 
  •  Low Cost – Unlike other businesses, the cost of forex trading is low. Traders only need to bear nominal swap charges on overnight positions as well as small spread/commission charges. There are no capital investments or hidden charges involved. 
  • Tax Relief – Profit generated from forex trading is not taxable in many countries around the world. In some jurisdictions where traders need to pay taxes on forex earnings, tax relief on spread betting can still save a lot of money. 
  • Accessibility – Traders can access the forex market using an internet supported mobile device or a PC from anywhere in the world. The forex market remains open five days a week, allowing traders to trade round the clock. 
  • Liquidity – The forex market is well known for its increased liquidity. Traders can sell off their positions in no time. Also, the chances of price deviation in such a fast-moving market are nearly negligible. 

Cons

  • Key Players Dominance – Several key players, such as commercial banks, hedging funds, and institutional investors dominate the forex market. Because of having more access to information & technology, the major players may make it difficult for small traders to grab the trading opportunities.
  • Regulatory limitations – Being a non-regulated market, forex trading can sometimes make traders feel insecure. Specifically, if an offshore broker breaches the code of conduct, you have no other way but to bear it with patience. 
  • Less residual value – Unlike bond and equity markets where you can expect infinite receipts in the form of interest and dividends, the only source of income in forex trading comes from the disposal of currencies. 

How To Start Trading Forex in Bangladesh

Unlike some countries where forex trading is illegal, Bangladesh allows its citizens to trade forex with some limitations. According to the Foreign Exchange Regulation Act 1947, only banks and authorized brokers can offer forex trading services. Brokers need to verify the identity of their clients through the KYC process before taking them onboard. 

KYC is a short form of the phrase “Know Your Customer”. It’s a process through which brokers request their clients to verify their identity. Traders can use their national ID card, passport, or driving license for the same. Sometimes brokers can ask for additional documents, including bank statements or utility bills for address verification. 

After completing the identity verification process, traders can deposit funds in their trading accounts using various available payment methods. Usually, brokers accept payments through bank transfers, debit/credit cards, and e-payments, etc. 

After funding their accounts, traders can access the market using a trading platform offered by a broker. They can perform trading analysis to identify the expected direction of price using various analysis tools and charting options provided by a broker.

Forex Trading Communities, Forums, and Discussion Groups in Bangladesh

#1 BD FOREX PRO

BD Forex Pro is an online educational website for forex traders based in Bangladesh. In addition to general forex discussions, the website has multiple segments to explore. The platform also offers a course catalog to select your favorite course. Guide books to learn the basics of technical and fundamental analysis are also available on the website.    

#2 Forex Trader (Bangladesh)

With 13.6K members, the Forex Trader Bangladesh is an active group of forex traders on Facebook. It’s an open public group created to educate traders from Bangladesh on how to trade forex. The group members share different informative posts, helping traders to find the best trading resources. 

# 3 FX Bangladesh

FX Bangladesh is an Instagram community focusing on traders from Bangladesh. The main aim of the community is to help traders become financially stable. 

Forex Influencers to Follow in Bangladesh

#1 Shahid Sunny

Shahid Sunny is a professional forex trader holding years of experience in the forex industry. Shahid teaches people the basics of forex trading. He also offers video tutorials on how to sign up and use different trading platforms. 

#2 Kazi Rakibul Hoque

 Kazi Rakibul Hoque is an expert technical analyst working in the forex industry for the past 14 years. Kazi offers mentoring services to forex aspirants. He also conducts forex related workshops in different cities across Bangladesh. 

Frequently Asked Questions (FAQs) 

Is forex trading legal in Bangladesh? 

Yes, forex trading is legal in Bangladesh. However, regulations pertaining to forex trading might not be favorable for traders based in Bangladesh. Other than banks, only licensed brokers are allowed to offer forex trading services in Bangladesh.

What is the best time to trade forex in Bangladesh?  

The best time to trade forex in Bangladesh starts when the forex market is highly liquid. It is the time when two trading sessions overlap. Given below are the overlap timings of different trading sessions converted into Bangladesh Standard Time.

  1. US/London Overlap: 2:00 AM to 6:00 AM
  2. Sydney/Tokyo Overlap: 08:00 PM to 10:00 PM
  3. London/Tokyo Overlap: 09:00 PM to 10:00 PM

Is Forex Trading taxable in Bangladesh? 

Yes, forex trading is taxable in Bangladesh. All profits that exceed the taxable income threshold are taxable under the ordinary income tax rate. As per the income tax law, it doesn’t matter if the forex profits are generated as the main income stream or not. 

Can you make money by trading Forex in Bangladesh? 

Yes, forex trading can help you pocket a decent amount of profits every month. However, consistency with patience and effective trading strategy is the main ingredient of success in the forex trading business