Forex trading is among the most profitable things one can do for money these days. Though it is fraught with risk, the rewards are tremendous, which attracts a lot of people to the trade. However, the rules are different in every country, and you need to be aware of them if you plan on trading there. Malaysia is no exception.
The stock market in Malaysia takes a while to understand. There are a lot of nuances involved and a lot of questions that can perplex someone getting into it for the first time. Well, all those questions and more are what we plan on answering in this article, so if you are one of those people seeking answers, you’re at the right place! Let’s get started!
This is the most important question, isn’t it? Let us clarify right off the bat that Forex trading isn’t illegal, though it is regulated. Bank Negara Malaysia announced way back in 2012 that the purchase and trading of foreign currency in Malaysia is allowed but should only be done through licensed commercial banks, investment banks, Islamic banks, and international Islamic banks.
Below, we have listed out the various bodies that regulate and oversee the trade of foreign currencies:
This is the central bank of Malaysia and was founded back in 1959, making it the most important governing body in the country where money is concerned. It issues currency, acts as a banker to the government itself, and regulates its financial institutions, credit system, and monetary policies.
The MIDA is Malaysia’s principal agency to look over and funnel investment towards the manufacturing and services sectors of the country. It is also responsible for putting down the rules which govern the exchanging businesses in Malaysia. This includes Forex traders of all kinds.
The Securities Commission regulates every enterprise that deals with securities in the country. It supervises exchanges, central depositories, approval of corporate bond issuing while also regulating the mergers and acquisitions of companies and all matters related to securities and futures contracts, making it one of the most important financial bodies in Malaysia.
The FAA accredits every financial body in the country as per the rules and demands set forth by Bank Negara Malaysia. It aims to standardize and certify every financial institution that aims to do business in the country.
The SAC makes sure that the Islamic ideals are being respected and maintained in the country’s institutions and has full authority over Islamic banking, takaful business, Islamic finance, Islamic development of financial businesses, or any other business based on Shariah law and overseen by Bank Negara Malaysia.
As you can tell, the best way to trade Forex in Malaysia is by using one of the legal and approved institutions or brokers. You also need to maintain an Islamic account. The brokers or agents you choose to deal with must be deemed compliant with Shariah law.
Your best bet is to use some of the best internationally rated brokers who are shariah-compliant. Brokers like eToro, FXTM, Liteforex, and markets.com all fit the bill. However, don’t just pick blindly. Compare all of them and see which one fits your needs the most. Especially because you’re new, choosing the wrong trader can make a huge dent in your investment plans.
Yes, any income you make off of Forex trading in Malaysia is taxable under income taxes. However, capital gains do not incur taxes. The key to avoiding getting taxed is to trade with a swap-free Islamic trading account and are held to not getting any income from your trading; you should be able to keep your tax-free gains intact.
Because Forex trading is such a lucrative deal, countries can scarcely afford to ban it outright. There are a lot of pitfalls with regulating something like Forex trading, but it can be done properly, and Malaysia is trying to do just that. There are a lot of hoops you need to be mindful of when you’re trading in the country but, if you enjoy the game, there is enough reward to be had from the setup.
Be mindful of scams, stick to trusted vendors, and respect the law. Do your research and study the market, and make sure to get help when you need it. But above all else, be careful in everything you do. The markets are always volatile, and risks are always around the corner, but with enough research and common sense, you should be just fine.