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Forex Trading in Dubai 2021

Published by Usman Ahmed, MBA (Researcher)

Reviewed by Bowen Khong, ACCA

What Is Forex Trading? 

The act of selling and buying fiat currencies amid speculation in the forex market is known as forex trading. Besides being highly liquid, the forex market is one of the most volatile markets in the world. In addition to the supply and demand mechanism, several geopolitical factors create volatility in the forex market, allowing speculators to make profits. Forex trading can also become a nightmare if carried out without proper knowledge and understanding. 

How Does it Work?

Let me describe briefly how forex trading works.

Traders have to buy or sell one currency against the other, hence currencies are always traded in pairs. In forex terms, all currencies are denominated by a three-digit code such as GBP, USD, AED, etc. The first two letters of a currency code represent the country name, and the third letter is for symbolic reference. The standard format to quote a currency pair in the forex market is that the base currency always comes first, i-e GBPUSD, USDJPY, USD/AED. 

Traders can make profits in many ways, including spot, futures, and options trading.  However, the rule of thumb requires traders to always buy or sell the base currency against the quote currency. 

Let me use an example to further clarify the concept of forex trading. 

If you wish to buy 100 US Dollars (USD) with Arab Emirates Dirham (AED), you need to trade the USD/AED pair. The price quote you receive from your broker may look like USD/AED – 3.67. That means you can buy 1 USD for 3.67 AED. Therefore, buying 100 USD costs you 367.29 AED. 

Currencies may be traded two ways, i-e buy or sell. If you expect the currency pair might lose its value in the coming days, selling it at current price makes sense. Similarly, if you anticipate a rise in the currency’s value, buying it around current price level might generate some profit. 

Pros And Cons of Forex Trading 

Generally, forex trading is known as an easy form of investment that yields high returns. However, there are pros and cons you need to consider before starting your forex journey. 

Pros

  • Flexible Timings – The forex market remains open 24 hours a day except for weekends. It has four trading sessions, including Sydney, Tokyo, London, and NewYork. All trading sessions overlap each other for a few hours, allowing smooth market transitions. Therefore, traders have great flexibility to trade at their convenience. 
  • Increased Liquidity – Having more participants available round the clock than any other investment markets, the forex market is highly liquid. Increased liquidity helps filling up orders instantly without any significant price deviations. 
  • Less Price Manipulation – Higher liquidity levels also eliminate the risk of price anomalies and manipulation. Being a decentralized entity, forex market cannot be manipulated or controlled by governments or big institutions
  • Decentralization – The forex market is also referred to as an over-the-counter market with no centralized location. Although various central banks intervene as and when required, however, these are rare events. 
  • High Volatility – Generally, high volatility is considered a drawback of forex trading. However, it can bring some good returns as well. 
  • Variety of Tradable Currencies – Traders can access a wide range of currency pairs, including eight major currencies, cross pairs and so many exotic pairs . Pro traders looking for high volatility can easily switch between different currency pairs.
  • Minimum Capital Requirement – Traders can start their forex journey with a small investment amount as opposed to other businesses that require big infrastructure and human capital investments. 
  • Demo accounts – Virtually funded demo accounts allow traders to practice different trading strategies under live market conditions. Therefore, traders do not have to worry about losing their real funds. This is something not possible in any other business. 

Cons

  • Risk of Leverage: While leverage is helpful for small-scale investors, it also magnifies the risk of loss. Leverage can have a suicidal impact on newbies who might be unaware of the high volatility in the forex market. 
  • Uncertainty – The forex market can sometimes behave unprecedentedly owing to different geopolitical factors. Drawing an exact conclusion on price movement is not possible in forex trading. Mostly, traders have to rely on technical indicators, which can be disastrous if proved wrong. 
  • Patience Oriented – Forex trading involves a lot of patience. Continuous effort and disciplined trading are prerequisites of forex trading. Mostly, newbies quit their forex journey in initial phases after suffering losses due to lack of knowledge and expertise. 

How To Start Trading Forex in Dubai

The United Arab Emirates (UAE) has a strong presence in the forex world. Being a prime financial center, Dubai serves as a home for many forex brokers. The Dubai Financial Services Authority (DFSA) is the main regulator that oversees forex brokers across the UAE. Due to strict regulatory requirements, all financial intermediaries and forex brokers need to obtain a license from the DFSA before starting operations in Dubai. 

Read: Best Forex Broker in UAE

Further, brokers require their clients to complete the KYC (Know Your Customer) process to comply with the global Anti Money Laundering (AML) and Anti Terror Financing (ATF) laws. The KYC process is used for the verification of clients opening accounts with a broker. For account verifications, traders can submit a copy of their national ID card or passport. A driving license is also acceptable.  

After account verification, you have to deposit funds in your trading account. Generally, brokers allow multiple payment methods, including credit/debit cards, e-payments and wire transfers, etc. 

Once done with deposits and account verification, traders may download their preferred trading platform and start trading right away.  

Forex Trading Communities, Forums, and Discussion Groups in Dubai

Socializing with other trading professionals can help you increase your forex exposure. You start understanding the trading psychology of traders and learn from their mistakes. Listed below are some top online forex communities and forums for UAE based traders. 

#1 Forex Expo 

Forex Expo is a major social networking platform that focuses on traders from all over the UAE. The forum connects trading professionals and investors to discuss and share innovative trading ideas. You can join the group through social media channels, including Facebook, Twitter, and Instagram, etc. They also hold meet up sessions occasionally. To register for a seminar, you can visit the official website of Forex Expo.

#2 Dubai Forex & Crypto Club

Dubai Forex & Crypto Club is a telegram group with over one thousand registered traders from all over the UAE. The group is worth joining if you are looking for quick assistance in your forex journey. You may find professional traders suggesting day trading ideas on currencies, stocks, and cryptos that can help you trade without carrying out your own analysis.

#3 Dubai Forex Group (DFX Group)

The Dubai Forex Group is an online community for forex trading aspirants based in Dubai. The forum has its head office in Jumeirah, Dubai. In addition to forex discussion, the group shares illustrative posts on different technical indicators, helping traders understand how technical analysis works. You can follow the community on their Instagram channel

Forex Influencers To Follow In Dubai

#1 Khurram Ali 

With over five years of trading experience, Khurram Ali is one the few trading mentors based in the UAE. Besides delivering lessons on forex trading, Khurram also helps traders to recover their forex losses. Here is the link to his website where you can find more details about him. 

#2 Mahesh

Mahes is a professional trader, investment specialist and a tech savvy with years of experience in the forex Industry. He is the founder and chief organizer of a forex group ForexchexDubai. He delivers lessons on forex trading.

Frequently Asked Questions (FAQs) 

Is forex trading legal in Dubai? 

Yes, forex trading is legal in Dubai and all over UAE. The country follows strict laws concerning forex trading. Traders living in Dubai should prefer trading through local brokers that are fully regulated by DFSA, the state-owned regulatory agency in Dubai.

What is the best time to trade forex in Dubai?  

The best time to trade is when the forex market is highly liquid. Usually, the forex market observes the highest liquidity when different trading sessions overlap each other. Given below are the overlap (high volatile market) timings as per UAE standard time.  

  1. US/London Overlap: 5:00 PM to 9:00 PM
  2. Sydney/Tokyo Overlap: 11:00 AM to 1:00 PM
  3. London/Tokyo Overlap: 12:00 PM to 1:00 PM

Is forex trading taxable in Dubai? 

No, traders do not have to pay taxes on their forex earnings. Having more than 30 duty free zones, Dubai has always been a point of attraction for traders across the globe.

Can you make money trading forex in Dubai? 

Dubai is one of the largest markets with interest from both local and international forex brokers as well as fund managers. Therefore, you have enough resources and opportunities to explore and make lucrative earnings with forex trading in Dubai. 

Usman Ahmed, MBA (Researcher)
Usman Ahmed, MBA (Researcher)
Usman Ahmed is a currency trader and financial market analyst with more than 7 years of active trading experience. Besides holding a Masters degree in Business Administration, he has worked for some of the most renewed companies in the forex industry including FXCM, IQOption, MetaQuotes, Alpari, FXStreet, DailyFX and several others. Usman possesses strong technical analytical skills and is famous for his very own, informative and entertaining, writing style. He believes in naked chart trading analysis that is commonly known as price action trading. He follows global financial news and macro-economic events very closely.
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