The Singapore Foreign Exchange Market has evolved into a vital hub of the global Forex market. With its open economy, stable financial system, and efficient legal framework, it is ranked among the most competitive locations in Asia for hedging risk(try it out here).
What are currencies?
Currencies are one of man’s oldest commodities – even before money existed, people traded goods with each other. Imagine buying bread from your neighbour using gold nuggets as currency! It wasn’t long before people realised that specific metals outshone others in terms of conductivity, strength, etc., and coins made out of these metals replaced the nuggets to form what we know today as “currency”.
There are two types of currencies
International Currencies issued by central banks throughout the world are a fixed value in terms of each other when expressed as a ratio. For example, when one British pound is worth $1.60, this means that 1 British pound = $1.60. And so on. The second type is called “Commercial Currencies”. They represent money used within the private sector, such as US Dollars or Euros, which can purchase goods and services in local markets without changing currencies.
What is Forex?
The Foreign Exchange Market (Forex) is where currencies from across the world exchange value with each other in real-time, 24 hours a day – you could compare it to a global stock market for foreign currency trading! When exchanging currencies, this involves buying one currency while selling another, so the value of the first currency increases in terms of the second currency. The Forex market accounts for more than 3 trillion dollars in trading volume each day – that’s around five times the size of all the shares traded on all the world’s stock markets!
How It Works Imagine you are travelling to Singapore with US Dollars in your pocket. You find yourself at Changi Airport waiting in line to exchange your money for Singapore Dollars when you see a sign advertising an exchange rate for euro vs yen. Chances are there is someone across town right now who wishes to buy euros and sell yen, willing to buy 1 euro with 139 yen. So you get out of line, go over to the other person and exchange your money. The main thing here is that you are exchanging US dollars for euros in this example, changing currencies in the process.
What are the benefits of trading Forex?
Currency markets constantly fluctuate due to various factors, including political changes, economic events, etc. Making quick trades on price movements based on an idea about where prices might be headed makes it possible to make profits or minimise losses. When done correctly, it can be both fun and profitable! Some companies even allow their employees to participate in their company-sponsored Forex accounts, which they can use during work hours for speculative purposes – a great way to get into Forex trading if you think it sounds interesting!
Fundamental analysis is when you look at an asset or currency (in this case, it would be the latter) and try to assess whether that price will go up or down based on factors not directly related to the price itself. It means things like political decisions, which could affect supply and demand; economic data, which could indicate what people are spending their money on; or even something like an upcoming football game if betting on sports is legal where you live!
There is no concrete mathematical evidence for why fundamental analysis as a trading method is more reliable than any other. However, there is evidence supporting it and evidence against other forms of analysis – all outside factors aside! Although this article focuses on fundamental analysis in Singapore forex trading, these principles can be applied to any market out there.
Fundamental analysis has been around for a long time – possibly even since the first markets were created. Most academics will agree that it’s been the dominant analysis method used by traders throughout history.