Israel has a reputation as one of the shadier hubs of forex investing around the world. One ongoing investigation holds Israeli officials potentially responsible for protecting a scam that swindled $20 million from 3,000 French citizens in 2018. Regardless, the country remains one of the central hubs of forex trading in Asia.
Needless to say, if you want to trade forex from Israel or with an Israeli brokerage, you should engage proper due diligence. The Israeli Securities Authority has issued guidance that it will hold forex companies to a higher standard of transparency, but the final responsibility falls on the individual investor.
Get Started with Forex in Israel
Get started investing in forex in Israel through the following steps:
- Connect to the internet. You improve your chances of success and protect yourself from bad actors through a solid internet connection. Your web connection ensures that you have timely access to your broker, trading interface and bank accounts.
- Use only reputable brokers. Vet your forex broker for compliance with international financial authorities. The decentralized nature of forex means that you can do business in the market with offshore brokers.
- Connect your bank account. It is usually easiest to fund your investment account from an outside bank account. Check the reviews of your broker and its internal policy to ensure that you can get your money out when you need to. Depending on your broker, you may also be able to fund it from a debit card or a credit card.
- Fund your brokerage account. After you have properly vetted your brokerage and connected your outside account, you are ready to fund your investment account.
- Get a trading program. The trading user interface (UI) that you use is your direct connection to the market. Make sure this interface does not add any latency to your forex pipeline.
- Begin investing in the forex market. You can begin trading safely in the forex market.
Israeli Forex Trading Strategies
Before drilling down into an individual strategy, you should learn the blueprints that successful investors use to trade forex. Here are the general outlines that traders around the world use.
Attribution: The Times of Israel
Scalpers are high-frequency traders who look for small profits on extremely fast trades. They often make use of automated bots to speed up the frequency and accuracy of trades, which may last for less than 1 second. If you choose high-frequency trading, you will be competing against large institutions with the most advanced investing setups in the world. Having a strong internet connection is very important because you will be making split-second decisions that involve very short windows of opportunity.
Swing traders wait for discernible trends to develop in currency prices, taking advantage of patterns as they emerge. In many cases, the chart pattern will take on the appearance of a swing, thus the name of the trading strategy.
Attribution: Meetup – A trading range that a swing trader might buy and sell repeatedly
Swing trades take place over the course of weeks, days or hours. Investors may have multiple trades open at once with a different time frame on each trade. Identifying the type of trend that is developing is also important in correctly assessing a situation for profit.
Positional investors are long-term investors who may hold trades for months or even years at a time. They are also known as fundamental investors. Long-term investments are less informed through charts and trading indicators and much more informed by long-term economic and political policy. Investors will need to know the forward-thinking guidance of a country’s import/export balance, gross domestic product (GDP) expansion and other macroeconomic variables. Positional traders make their money identifying currencies whose value is out of position with their prices, hence the name “positional investor.”
Forex Trading Example in Israel
NIS/USD is trading at 0.2940/0.2960, and you want to buy ₪50,000. This exchange rate seems low to you, and you believe it will rise rather quickly. You have a margin account with your broker which will allow you to control a ₪50,000 investment with $1,200.65 cash in your account at a margin rate of 8.14%.
The new NIS/USD price after 5 hours of trading is 0.2980/0.3000, which corresponds to a 20-point move. Your total profit on the investment is (₪50,000 x 0.2980) – (₪50,000 x 0.2960), or $80.
Making Money with Forex in Israel
After picking your overall investment strategy, you can begin thinking about the financial vehicle you prefer. Some of the most commonly used vehicles in forex investing include:
- Short selling: If you are good at determining when a currency will fall in value, then you can make money short selling that currency.
- CFDs: Short for contracts for differences, CFDs allow brokers to trade investments that track currency prices without actually owning currencies. Be wary of the high leverage some CFD brokers offer — they can be devastating for an untrained investor.
- Binary options: Binary options offer investors a yes or no proposition. They seem simple, but the Commodity Futures Trading Commission (CFTC) found that many Israeli forex scams are based in binary options trading. Be especially careful if you plan to do business with an Israeli binary options broker.