Contrary to popular belief, it’s completely legal to trade forex as a resident of Pakistan. As Pakistan’s economy continues to grow and change, more and more Pakistani traders are turning to the forex market for its near-limitless potential. If you’re thinking about getting started trading forex from Pakistan, use our guide to open your account and make your first trade.
Get Started with Forex in Pakistan
There are almost no restrictions on forex trading in Pakistan (though buying and selling cryptocurrencies is currently against the law). Despite national regulations from the Securities and Exchange Commission of Pakistan (SECP) intended to cut down on the amount of fraud and money laundering, many local brokers aren’t registered with the SECP.
As a result, it’s highly recommended that you open an account with a forex broker based outside of Pakistan. It’s legal for international brokers to offer accounts to Pakistani traders, though not every broker chooses to. Here’s the basic setup process you’ll go through when you open an account with an international forex broker:
- Find a stable internet connection. A reliable, consistent internet connection is the most important prerequisite you’ll need to have before you can trade forex. Set yourself up with a consistent internet connection before you continue.
- Choose a broker. Most forex traders in Pakistan choose to open an account with an international broker because brokers in Australia, the United Kingdom and the United States are strictly regulated. Select a broker to open an account with and apply.
- Select a platform. Though your forex broker might offer its own trading platform, you might also want to use a more comprehensive platform like MetaTrader 4 or 5.
- Fund your account. After you open your trading account and your broker approves your personal information, you’ll need to fund your account. Most international brokers allow Pakistani traders to fund their account by linking a bank account and converting rupees to USD, GBP or another more liquid currency for trading purposes.
- Make your first trade. Once your account has been funded, you can officially make your first currency trade.
Pakistan Forex Trading Strategies
Most Pakistani traders choose to trade on the Asian session, when most activity happens on the Tokyo forex exchange. If you’re just beginning with forex trading, it’s recommended that you begin by trading a major currency pair like the USD/EUR or USD/JPY to limit liquidity issues. Most international brokers offering accounts to traders in Pakistan will allow you to deposit USD into your accounts with a bank transfer.
Here are a few technical indicators you might want to use when trading. Though these indicators aren’t foolproof, they can give you a good idea of where to begin developing your technical trading strategy.
A momentum indicator is a technical indicator that measures a sudden change in price movement. A reversal of previous trends may signal that the momentum of a currency is changing directions, which can signal that you should buy or sell. Many traders use momentum indicators when exchanging currencies because these indicators lag behind trends — this means that while you’ll enter later, you’re less likely to misread the signal.
A reversal candlestick is a signal that may indicate that a trend is changing and that the pattern a currency is following will shift. There are both bearish and bullish reversal candlesticks that may indicate that a currency will stop falling or rising in value. Short-term traders and scalpers often rely on reversal candlesticks instead of momentum indicators because they capitalize on smaller volatile shifts.
Forex Trading Example in Pakistan
Let’s take a look at an example of how you might make money when trading forex as a Pakistani trader.
Most traders in Pakistan choose to convert their native rupees to a more liquid currency like the USD or EUR when trading forex. Imagine that you believe that the value of the EUR is going to rise in relation to the USD. You fund your account with 200,000 rupees and convert your entire lot to USD. When the transaction is complete, you have $1,250 USD.
Your broker offers you 10:1 leverage when trading in USD, which means that you can now trade with the power of $12,500. The USD to EUR conversion rate is currently 1 USD to 1.12 EUR. You convert your entire lot to EUR, leaving you with about 11,160 EUR.
Soon, the value of the EUR begins to rise in comparison with the USD. When 1 USD is equal to 1.20 EUR, you decide to sell. You convert your entire lot of EUR back to USD, leaving you with $13,392. After you return what you borrowed on margin, you’re left with a profit of $892 USD.
Making Money with Forex in Pakistan
There are no legal restrictions that prevent a Pakistani trader from opening an account with an international or domestic broker. There are also no regulations that limit the amount of profit you can take from international currency trades. Though the Pakistani rupee is not generally considered to be a reserve currency or a currency suitable for regular trading, most international brokers allow Pakistani traders to fund their account with USD. This can open a significantly wider world of trading opportunities for native rupee holders.
Though the Pakistani forex market is largely unregulated, there are still a few rules you’ll need to follow to document your profits. First, you must keep running documentation of your total profits and you may only open an international account if you are a Pakistani tax filer. Under the Federal Bureau of Revenue’s rules, tax filers may be subject to up to 15% tax on forex profits, so be sure you’re setting aside enough money to pay your taxes. If you are not a tax filer, you may be able to open an account with a domestic broker but you’ll find yourself subject to standard capital gains tax rates.
Best Online Forex Brokers in Pakistan
Though the domestic forex market of Pakistan is growing, many brokers are still operating without oversight from the SECP. We recommend opening an account with an international broker based in a country with stricter fee control and conduct regulations.
If you aren’t sure where to begin, consider a few of our top choices offering accounts to Pakistani traders below.
100 of your selected base currency
1 Minute Review
FOREX.com is a one-stop-shop for forex traders. With a massive range of tradable currencies, low account minimums and an impressive trading platform, FOREX.com is an excellent choice for brokers searching for a home base for their currency trading. New traders and seasoned veterans alike will love FOREX.com’s extensive education and research center that provides free, informative forex trading courses at multiple skill levels. While FOREX.com is impressive, remember that it isn’t a standard broker. You can’t invest in the stock or bond market through your FOREX.com and you cannot open an account with tax advantages. The confusing pricing and margin structures may also be overwhelming for new forex traders.
- MetaTrader 4 users
- Beginner forex traders
- Active forex traders
- Impressive, easy-to-navigate platform
- Wide range of education and research tools
- Access to over 80 currencies to buy and sell
- Leverage available up to 50:1
- Cannot buy and sell other securities (like stocks and bonds)
- Confusing margin requirements that vary by currency
- Limited customer support options
- Cannot open an IRA or other retirement account
1 Minute Review
A fully regulated broker with a presence in Europe, South Africa, the Middle East, British Virgin Islands, Australia and Japan, Avatrade deals with mainly forex and CFDs on stocks, commodities, indexes, forex, cryptocurrencies, etc. This brokerage is headquartered in Dublin, Ireland and began offering its services in 2006. It offers multiple trading platforms and earns mainly through spreads.
- Advanced traders
- Traders looking for a well-diversified portfolio
- Controlled by regulatory agencies of multiple countries
- Choice offered in terms of trading platforms
- Support available in 14 languages and trading platforms in 20 languages
- Practice/demo account available for trying out
- Breadth of trading assets
- Does not accept customers from the U.S. as it isn’t regulated in the U.S.
- Transferring funds to the account may take up to five days; withdrawals could take up to 10 days
1 Minute Review
Though Australian and British traders might know eToro for its easy stock and mobile trading, the broker is now expanding into the United States with cryptocurrency trading. U.S. traders can begin buying and selling both major cryptocurrencies (like Bitcoin and Ethereum) as well as smaller names (like Tron Coin and Stellar Lumens).
eToro offers traders the opportunity to invest their assets into premade portfolios or cryptocurrencies, similar to services offered by robo-advisors through traditional brokers. Though eToro isn’t a one-stop-shop for everything an investor needs, its easy-to-use platform and low spreads is a great way to enter the cryptocurrency market.
- International Forex/CFD Traders
- New cryptocurrency traders looking for an easy-to-use platform
- Traders who want to buy and sell cryptocurrencies on-the-go
- Simple platform that is easy to master
- CopyTrader feature that allows new traders to copy the same strategies used by professionals
- Virtual dummy account that gives you $100,000 to practice trades
- U.S. traders currently limited to cryptocurrencies
- Only 15 major coins available to trade
Before you begin trading forex, it can be helpful to familiarize yourself with some of the most common forex trading terms. Below are some terms you’ll hear again and again while trading.
- Pip: A pip is the smallest possible unit of a currency, usually calculated to the 4th percentage point. For example, $0.0001 is one pip in the context of the USD.
- Lot size: Your lot size is the total number of units of a currency you’re trading. For example, if you place an order to sell 1,000 Pakistani rupees, your lot size is equal to 1,000. Most regular traders consider 100,000 units of any currency to be a “standard” lot.
- Order: An order is a specific set of instructions that tells your broker which currency you’d like to buy or sell, the price you need your purchase or sale to be executed at, the number of shares you’re moving and more. There are multiple types of orders and different order types can be used to limit loss and maximize profits.
- Call: If your equity drops below a certain percentage when using leverage, you may be subject to a margin call from your lender. If you wish to maintain your position, you’ll be required to deposit a set amount of money into your account in addition to your initial deposit. This can quickly wipe out your profits, so be careful when using margin.
Trade Forex in Pakistan
With a nearly around-the-clock market and trillions of dollars moving in and out of the market on a daily basis, the forex realm can offer rarely seen opportunities for Pakistani trades. However, it can be even easier to lose money when trading currencies if you aren’t careful. Remember to thoroughly investigate each broker before you open an account and be particularly mindful of any leverage you do decide to use.
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