A Guide to Trading Forex in the Philippines

Forex trading in the Philippines has gained traction in recent years as more Filipinos explore global financial markets for investment opportunities. The foreign exchange (forex) market is one of the largest and most liquid financial markets worldwide, where currencies are traded around the clock. In the Philippines, forex trading is increasingly accessible, thanks to advancements in technology, mobile apps, and regulatory improvements. This accessibility allows individuals to engage in forex trading from home, aiming for profits by leveraging currency price movements.

For those interested in forex trading in the Philippines, it's essential to understand the regulatory framework, as well as the platforms and tools available to Filipino traders. The Securities and Exchange Commission (SEC) and the Bangko Sentral ng Pilipinas (BSP) oversee activities in this space, ensuring that traders and brokers operate within the law. Understanding these regulatory requirements, along with mastering the fundamentals of forex trading, is crucial for a successful and safe trading experience in the Philippines.

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How to Get Started with Forex in the Philippines

Getting started trading currencies in the foreign exchange market is relatively easy although adverse regulations in the Philippines make things a bit more complicated for residents of that country. Here’s the basic set of steps you’ll need to take to make an initial forex currency exchange:

• Step 1: Use a device that offers you Internet access. The faster the internet speeds, the better your trade execution will be.
• Step 2: Find an online forex broker that is licensed to operate in the Philippines.
• Step 3: Fund the account.  
• Step 4: Open a margin account and make a deposit.
• Step 5: Download a forex trading platform with which that broker connects. 
• Step 6: Make your trades. 

The Philippines FX Trading Strategies

Once you go through the 6 steps outlined in the previous section you will have a funded margin account with a broker that allows you to trade the foreign exchange market from the Philippines. You’ll want to develop a trading strategy to incorporate into your trading plan to increase your chances of success.

You can find popular trading strategies listed below that can be suitable for retail traders no matter whether they are trading from the Philippines or elsewhere in the world. 

Scalping

Foreign exchange trading at a high volume and very short term involves entering and exiting the market quickly to capture a few pips at a time. You can repeat this process several times a day if you choose. Keep in mind the foreign exchange rate is a major factor to consider with scalping.

Day Trading

Entering and exiting transactions during a single trading session to avoid the extra risk involved in taking overnight positions. Trading decisions are often based on technical analysis, and you must understand historical trends if you wish to make informed decisions.

News Trading

Using strategies that take advantage of the extreme exchange rate volatility that occurs shortly after the release of important news or economic data. Current events often drive currency prices, and you must know what is happening minute-to-minute while trading.

Swing Trading

Entering and exiting the market usually based on momentum technical indicators with the general objective of buying low and selling high. Swing traders can also take positions overnight with the expectation that their position will improve when the market opens.

Trend Trading

Involving a longer-term strategy that looks for established directional movements called trends and then trading along with them until the trend concludes. In these cases, you are trading for the future.

An upward trend in the EUR/JPY currency pair from 114.41 to 124.43 that a trend trader could have profited from. The daily candlestick chart also shows the 10-day moving average and 14-day ADX trend indicators. Source: MetaTrader.

Forex Trading Example in the Philippines

The national currency of the Philippines is the Philippine peso or piso (ISO: PHP). It has the symbol ₱ and ranks 30th in turnover within the forex market among the currencies of the world in April 2019, according to the Bank for International Settlements (BIS).  A current quote for the USD/PHP exchange rate is 50 pesos to 1 U.S. dollar.

If you thought the USD/PHP rate was going to rise from its current level, then you might purchase $100,000 against the Philippine peso today at that exchange rate of 50.00. If the USD/PHP rate then subsequently rose to 51.00, you would use the following calculation to determine your trading gains:

100,000 USD x (51.00-50.00 PHP/USD) = 100,000 PHP

To convert that amount of Philippine pesos profit into U.S. dollars, you need to perform the following calculation:

100,000 PHP ÷ 51.00 PHP/USD = 1,960.78 USD

Alternatively, if the USD/PHP market had instead fallen to 49.00, your trading loss would be:

100,000 USD x (49.00-50.00 PHP/USD) = -100,000 PHP

Your loss converted into U.S. dollars at a USD/PHP exchange rate of 49.00 would be:

-100,000 PHP ÷ 49.00 PHP/USD = -2,040.82 USD

Broker Regulations to Keep in Mind

In the Philippines, forex brokers are regulated by the Securities and Exchange Commission (SEC) and the Bangko Sentral ng Pilipinas (BSP). These regulatory bodies oversee and supervise the operation of forex brokers to ensure they comply with regulations and protect the interests of investors.

If you’re based in the Philippines and would like to trade forex, you should know that the Philippines’ Securities and Exchange Commission (SEC) has taken a rather adversarial stance against forex trading due to reports of fraud and heavy losses by retail traders. In fact, the SEC has issued two advisories in recent years stating forex trading is illegal to discourage private individuals from trading currencies and local brokers from engaging in the forex business. 

Forex trading may not be strictly legal in the Philippines so you may not find a local broker that will let you trade currencies. Despite that, you might still find an international online broker based outside the Philippines to trade the foreign exchange.

Making Money with Forex in the Philippines

If you can come up with a consistently profitable strategy to implement in your trading plan that you can stick to within the requirements, you should be able to make money trading forex in the Philippines. 

The key element to your success consists of formulating a profitable trading strategy. Most successful trading plans include objective trading criteria, risk/reward analysis and sound money management principles. Also, keep in mind that many strategies do not make money regularly over time due to changing market conditions, even if they might work well for a while. 

Compare Online Forex Brokers in the Philippines

To trade currencies locally in the Philippines you will need special authorization, a substantial sum of money, and a bank to trade currencies with. That tends to rule out most retail traders, but various online forex brokers based outside the country still accept Philippines based clients. You can consider that alternative if you have a smaller sum to trade. Top brokers also allow you to keep an eye on forex rates with the help of a currency converter and rate alert.

Forex Terminology

Like many professions that have evolved their own jargon, forex traders use unique terminology you will probably want to learn before starting to trade. These include the following terms:

• Lot Size: Standard lot size is 100,000 base currency units.
• Margin Calls: These happen when your trading account requires more funding for you to hold your existing positions. 
• Orders: Instructions given to your broker to execute transactions on your behalf. Various order types exist, such as limit, stop loss, take profit and market orders. 
• Pip: Stands for point in percentage and represents the smallest amount that a currency pair’s exchange rate quotation can change. 
• Pound Sterling: A nickname for the British pound, though it is no longer backed by silver.
• Short Covering: A phenomenon whereby traders shorting a currency start buying as the price rises.
• Stop-Limit Order: An order placed at a higher price that allows you to profit before the currency drops once again.
• Stop-Loss Order: An order placed at a lower price that allows traders to avoid losses as currency prices fall.
• XAG/USD: The symbol for the silver index in U.S. dollars.
• XAU/USD: The symbol for the gold index in U.S. dollars.
• Yield: The return on your investment.

Does Trading Forex in the Philippines Make Sense?

Given the unfavorable local regulatory environment imposed by the Philippines’ SEC, you might want to think twice about trading forex from the Philippines. Although some retail forex traders have been able to make margin account deposits using online payment services, you really never know when that loophole might close.

You would therefore probably be taking an extra risk by opening a forex trading account with an international broker to trade in from the Philippines. Since trading any financial market requires you to take at least some risk, that might be an additional risk you feel ready to take in order to have the opportunity to trade currencies. 

If so all you need to do is contact an international forex broker that takes clients from the Philippines and follow the necessary steps outlined above to open and fund an account with the broker you select. You may want to check the foreign exchange rate charts to compare the rates for the US dollar and other currencies.

Frequently Asked Questions