What are the Best Times to Trade Forex in Singapore?
The best time to trade forex in Singapore is between 9 and 12 PM in the evening, as the London and New York markets overlap, creating the best trading conditions.
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Short selling, or simply “shorting,” is a strategy that involves betting on falling prices of an asset. This strategy is slightly different from shorting currencies since they trade in ratios—thus, shorting a currency means selling one currency while simultaneously buying another, hoping to profit from an upcoming price correction.
Short selling involves selling a base currency and simultaneously buying a quote currency. For example, if a trader thinks the value of the USD/SGD (U.S. Dollar/Singapore Dollar) will fall, they can sell this pair. Essentially, the trader is selling U.S. dollars and buying Singapore dollars, hoping the USD weakens compared to SGD. If the USD/SGD exchange rate declines, the trader can repurchase the pair at a lower price, locking in profits.
An important aspect of short selling is leverage, which allows traders to control larger positions than their initial investments. For instance, with leverage of 50:1, a trader with $1,000 can control a $50,000 position. Still, leverage boosts risks and returns and thus requires thorough understanding before utilization.
Betting on prices to fall offers multiple advantages:
There are multiple risks associated with short selling of a currency:
Successful short selling comes from quality analysis, timely execution, and sound risk management.
One of history's most famous examples of short selling is George Soros' shorting of the British Pound in the early 1990s. Soros believed the British government could not maintain its currency within the European Exchange Rate Mechanism (ERM), and he bet against the pound.
His hedge fund, Quantum Fund, shorted billions of pounds, forcing the Bank of England to withdraw from the ERM and devalue the currency. Soros made an approximately $1 billion profit, earning him the nickname "The Man Who Broke the Bank of England."
Short selling can raise ethical concerns, particularly regarding insider trading and market manipulation. Still, short-selling securities like equities are vastly different from short-selling currencies.
Equities present a stake in the company that can go to zero, and short-selling shares equal betting against the company, making it less compelling from an ethical standpoint but a normal process of price discovery.
However, currencies cannot go to zero. They can go down in value but never to zero, and since they trade in ratios – selling one currency involves buying another and represents a bet that the other currency will outperform.
Short-selling a currency involves opening a position speculating that the nominal currency's value will fall. In contrast to securities like equities, short-selling a currency involves betting that another currency will outperform the base currency.
Shorting a US dollar means selling a pair with USD as a base currency. Thus, it means betting that the quote currency will go higher—for example, SGD in the USD/SGD pair.
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What are the Best Times to Trade Forex in Singapore?
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