Forex Trading in Dubai: Step-By-Step Guide • Benzinga (2024)

The Middle East has a strong presence in the trading world, and given its enormous reserves of crude oil and other commodities, the strength of the U.S. dollar in the foreign exchange market versus local currencies can strongly affect Middle Eastern economies.

As one of the major financial centers in the Middle East, Dubai, and the other Emirates currently serve as the home base for many forex brokers and other online trading operations, including cryptocurrencies.

Overview: Trading Forex in Dubai

Dubai offers one of the largest concentrations of both internationally and locally-based forex brokerages in the Middle East. Local forex brokers are regulated by the Central Bank of the United Arab Emirates (UAE), while their brokerage licenses are issued by the Securities and Commodities Authority (SCA).

In addition, companies domiciled in the Dubai International Financial Centre (DIFC), a financial-free zone in Dubai, are regulated by the Dubai Financial Services Authority (DFSA). Dubai hosts several forex brokers that offer Islamic trading accounts with no daily overnight swap fees that are regulated by the SCA, such as SMC Comex and Century Financial.

Trading forex in Dubai is relatively easy since you can use local or foreign brokers like FOREX.com, for example. Selecting a suitable broker that you can entrust with your deposit and which offers the features you need.

The main advantage for Dubai residents of using a broker based in Dubai is that you have easier local legal recourse if the broker fails and it’s overseen by one of the local regulators such as the SCA, DFSA and the Central Bank of the UAE. When residents are spending massive amounts of money, legal recourse is extremely important. Moreover, this ensures that the broker is regulated locally, letting you know that the products offered align with what you are accustomed to.

How to Start Trading Forex in Dubai

Several local brokers offer their services to Dubai residents, in addition to offshore brokers, some of which maintain full-service regional offices in Dubai. In addition, Dubai-based forex brokers accept clients from all over the world, not just from the Emirates. If you prefer to visit a local office, that might give you the opportunity to get the customer service you prefer—face-to-face interaction. Or, at the very least, you can speak with someone who you know is local.

Nevertheless, not all forex brokerages are created equal, so make sure to carefully consider your needs before you open an account.

To start trading forex in Dubai, the first consideration for any potential or seasoned trader is to know trading risks, understand market analysis and have a good idea of what sort of additional effort trading in the forex market entails. Educational resources and books on trading forex can be readily found on the internet, and many forex brokers also offer helpful learning material.

Also, most forex brokers will offer a free demo account for you to try out their trading platform and assess their services. Trading in a demo account before committing any funds is strongly recommended for both novice and seasoned traders to determine the broker’s reliability and to gauge their effectiveness in filling your orders.

Step 1: Consider Your Needs

Your needs as a trader will depend on the level of experience you have. If you have experience trading in the stock market, for example, then you probably have a good idea how to analyze the market’s direction from a technical perspective and can research fundamental information pertinent to individual stocks.

Quality information is necessary for forex trading. While many forex brokers offer their own proprietary platforms, the MetaTrader4 and MetaTrader5 platforms by MetaQuotes Software are the gold standard.

If you’re completely new to trading, you might be better off with a broker that offers a simple trading platform and plenty of educational material and support to novice traders. The key is to find the best forex broker for your particular needs.

Step 2: Pick a Broker

As you decide on a forex broker, several elements should be carefully considered. One of the most important elements consists of whether the broker is strictly regulated by a reputable government agency.

The agency could be a foreign one, such as the U.K.’s Financial Conduct Authority (FCA) or Cyprus’ CySEC that enforces operations under the EU’s Markets in Financial Instruments Directive (MiFID). If you have opted for a Dubai-based broker, then the regulator will be either the SCA or the DFSA.

Other considerations consist of whether the broker uses an electronic communication network (ECN) or if the broker functions as a market maker.

Step 3: Open an Account to Start Trading

Once you have decided on a broker, you can then proceed to open a demo or live funded account so you can begin to trade. Keep in mind that your results trading in a demo account could be drastically different than when you trade in a live account, so it makes sense to start with small amounts.

Many reasons for this exist, although the primary cause with discretionary trading systems is that people tend to react differently when their own money is at stake versus when it isn’t.

An easy-to-implement trading plan that incorporates sound money management principles often makes the difference between a profitable trader and one who stops after a few losses. A solid trading plan also gives you the confidence you need to deal with the inherent volatility of the forex market.

In addition to forex trading, many online forex brokers offer trading in Contracts for Difference (CFDs), which can allow you to also trade in commodities, cryptocurrencies, metals and stock indices, as well as some individual high capitalization stocks such as Apple Inc. or Amazon.com.

How to Choose a Forex Broker in Dubai

If you aren't sure how to choose a forex broker in Dubai, you can find some of the most relevant elements to consider before deciding on a forex broker below.

Regulation

Regulatory oversight is one of the most important considerations as you choose a forex broker. If the broker has no official regulatory body that oversees operations, you have less legal recourse in the event the broker fails to meet its financial obligations, which could result in the loss of your entire margin deposit.

ECN or Market Maker

An ECN broker displays the best bid and offer rates available from a group of market makers. The ECN broker then fills your order at the best exchange rate available. Some ECN brokers charge a commission in addition to the dealer spread.

Alternatively, if the broker is a market maker, then your order is filled by the broker who then takes the other side of the trade at their price. A conflict of interest can arise when the market maker takes the other side of your trades without offsetting them; if you trade well, you can cause the broker to incur a loss.

Leverage

The amount of leverage you can use and the margin requirements on your account can also make a significant impact on your overall profits and losses. Maximum leverage rates can vary widely. Some brokers offer leverage of up to 3000:1 on forex accounts. That sort of leverage means that for every dollar you put up, you can control a position of $3,000 in a currency pair.

Remember, however, that leverage can be dangerous because losses can mount quickly. You must research your investments as carefully as you possibly can. You are taking out a loan from the broker, investing that money and hoping you can get it back. However, you may need to keep a long position. When that is the case, you must be prepared to make payments on the leverage you’ve taken prior to exiting that position.

And, of course, if you lose money on the investment, you still need to pay back the leverage loan even though you likely didn’t make enough money to cover it.

Margin

Margin is the amount of money needed to implement leverage. For example, if your account has a leverage of 100:1, then you would need $1,000 deposited as margin to hold a $100,000 forex position in your trading account.

Keep in mind, again, that trading with leveraged positions means you can make a lot more money on profitable trades, though losses are magnified, which can severely deplete or even eliminate your account’s balance.

Dealer Spreads

One of the ways that brokers make their money consists of a difference between the exchange rate at which they buy and at which they sell, known as the bid/offer or dealing spread.

Instead of charging a commission per transaction, forex brokers simply widen their dealing spreads to you. Therefore, finding a broker that offers narrow spreads can save you plenty of money in the long run if you intend to actively trade. Keep in mind that spreads might also change. Look into the spreads offered by your preferred broker and ensure that they are not increasing unnecessarily. If you’re unhappy with the spreads you’re getting, feel free to switch to another broker.

Trading Platform

Most online forex brokers use their own proprietary trading platforms or support the use of the popular MetaTrader4 and MetaTrader5 trading platforms from MetaQuotes.

These similar platforms offer state-of-the-art trading software with powerful analytical features such as a complete technical analysis suite, invaluable for assessing the direction of currency pairs.

Also, MetaTrader has a customizable interface and is programmable, which allows you to program and automate your own trading plan. Many third-party developers offer programs for automatic trading called “expert advisors” (EAs) that you can download and use with your own trading account.

Demo Account

Use a broker’s free demo account to give you an idea of how efficient the broker is in filling your orders; you can also practice trading in a live account. Practicing is often the safest way to protect your cash because you want to know what will happen when you make particular investing decisions, without risking your own money.

Customer Service

Ideally, you should be able to contact your broker throughout the trading week (24 hours a day, five days a week) either by telephone, live chat or quick-response email in the event of an erroneous trade or simply to ask a question.

Educational Resources

If you are new to trading forex, look for a broker that offers a wide range of educational resources. These resources can include articles, videos and other tools you can use to make trading decisions.

Best Forex Brokers in Dubai

Taking the above criteria into consideration, Benzinga put together a list of the top forex brokers that offer trading in Dubai. Take a look.

Final Thoughts on Trading Forex in Dubai

Overall, trading the forex market in Dubai involves finding the right broker for your needs, especially if you have little or no experience in trading. If you have experience, then you should have no problem finding a broker that meets your requirements, whether you choose one based in Dubai or elsewhere.

Though finding a good broker to partner with is very helpful to your trading business, the most important factors that will enhance your trading success involves your trading plan and your level of preparation.

Frequently Asked Questions