Day Trading In Singapore 2023
Day trading in Singapore is a popular way to speculate on the financial markets, in part due to the avoidance of overnight fees and slippage risks. Day trading involves opening and closing several positions within one trading day, requiring a fair amount of thought, time and dedication. This article provides a complete guide to day trading in Singapore, including what it is, how you can get started, what it means for your taxes and how to pick the best broker.
Top 3 Brokers in Singapore
What Is Day Trading In Singapore?
Day trading involves the buying and selling of financial instruments within a single trading day, meaning that you close any open positions before the end of the day and do not hold overnight positions.
Day trading allows investors to buy and sell several assets numerous times within the same day to trade on small market movements in both directions.
As each trade requires its own calculations and execution, successful day trading in Singapore can take both time and attention.
Traders must be comfortable making speedy decisions to execute large numbers of trades during each trading session.
Day traders in Singapore can speculate on local stocks and forex pairs, like SGD/ZAR, SGD/GBP and SGD/AUD, and can buy and sell securities in international markets, including indices and cryptocurrencies.
Best Markets For Day Trading In Singapore
Choosing a market to day trade comes down to personal preference—what are you interested in and how much time and money can you afford to invest in trading this way? Some of the most popular markets for day trading in Singapore include:
The forex market is a good choice for day trading owing to the number of currency pairs available to trade and the high market liquidity.
Day trading forex is useful as investors can avoid paying swap fees and avoid the risk of overnight market movements.
Day traders in Singapore commonly trade the Singaporean dollar against major currencies, such as SGD/USD, SGD/GBP, SGD/EUR, and SGD/AUD. Other common pairings include SGD with BDT, BND and PKR.
Stocks & Shares
Day trading stocks is particularly popular as there is a vast variety of company shares to buy and sell.
With stocks and shares, it is common practice to close positions at the end of the trading day to avoid any external events influencing the share price overnight.
Similar to day trading stocks and shares, indices are limited by market opening hours.
When trading indices, you speculate on the performance of a group of shares rather than for a single company, thus providing investors greater exposure to a bigger slice of the stock market.
For example, indices day trading in Singapore is often done with the Straits Times Index (STI), which tracks the top 30 companies on the Singapore Exchange (SGX).
Day trading cryptos, such as BTC and ETH, is increasing in popularity. Crypto market trading hours are 24/7, enabling traders to hold positions overnight at zero extra cost, as well as trade on the weekends.
Contracts For Difference
Day trading in Singapore can also be carried out using contracts for difference, or CFDs.
In fact, Singapore is the fourth-largest CFD market in the world. CFDs are a contract made between two parties for an exchange of capital based on the price difference of an asset between the opening and closing time.
As CFDs are a contract, rather than a sale of the actual asset, you don’t gain ownership over the asset.
However, this also allows you to forecast the price of an asset going down, called going short, increasing flexibility.
Selection of the asset you wish to trade should be based on more than simply being a name you recognise.
Different markets for day trading in Singapore, and the instruments within them, all have different key characteristics. These factors you should consider are:
- Liquidity – How easily and quickly can you enter and exit the position? Liquidity is dependent on the number of active market participants and can make a huge difference to your profits.High liquidity means there are lots of other traders active and so your order will be filled quickly. On the other hand, low liquidity often results in slippage, where the asset price moves before your order has been filled.
- Volume – The trade volume of an asset is how much it is being bought or sold over a period of time. High volume means there is a lot of interest in the asset, which can help identify entry and exit points.
- Volatility – This characteristic can make a massive impact on your success. High volatility means that the price of the asset is moving around a lot, providing lots of opportunities for short term profits but potentially limiting longer-term growth.
How To Start Day Trading In Singapore
Open A CDP Account
Before opening a brokerage account to day trade in Singapore, you first need to open a Central Depository (CDP) account.
A CDP account with the SGX provides integrated clearing, settlement, and depository services for a range of products in the Singapore Securities Market and is where your securities are held.
You must be over 18 years old and have a Singapore bank account to open a CDP account. You cannot carry out day trading in Singapore without one of these accounts.
Day traders in Singapore can have shares held in a nominee or custodian account held by your brokerage, though this is less popular with local investors.
Choose A Broker
Once a CDP account has been obtained, you will need to find a broker that supports traders in Singapore.
Choosing a broker is one of the most important decisions and can make the difference between success and failure.
There are many providers for users in Singapore to choose from, so try to compare brokers using the following factors:
- Market access – Ensure that the broker you are looking at offers day trading in the Singapore markets you are interested in. This is important, especially if you wish to trade overseas, otherwise, you may find that you have paid to open an account and cannot execute the trades you would like to.
- Accounts in SGD – Selecting a broker that offers accounts with the Singapore dollar (SGD) as its base currency means that you won’t need to pay currency conversion fees, either for trades or deposits and withdrawals. Funding and emptying your account will also likely be quicker.
- Costs – Be aware of transaction costs and fees, as these can eat into your investment returns. Most platforms charge a fee that ranges from 10 SGD to 25 SGD every time you buy or sell a position. Some may also charge a commission based on the amount that you earn.
- Platforms – When choosing a broker to start day trading in Singapore, feeling comfortable with the platform it offers is key. For most traders, an easy-to-use interface is a must, whereas other investors may feel more at home with advanced charts. Safe, trusted platforms with good functionality for a range of trading experience levels include MetaTrader 4 (MT4) and cTrader. Platforms that are available on a mobile app make day trading in Singapore a more accessible experience. Other features like watchlists or automated trading are also worth looking out for.
- Regulation – When day trading in Singapore, ensure that your broker has a good reputation and is properly regulated by the Monetary Authority of Singapore (MAS) and/or the Singapore Foreign Exchange Market Committee and comply with Singapore’s Securities and Futures Act. All of this will mean your money is safely held in a segregated bank account, separate from the broker’s own, meaning that your capital is safe in the event of insolvency.
Open A Position
Once you have established your trading plan and opened your Singapore day trading account, it’s time to open your position by taking a position on your chosen asset, such as the SGD/USD.
It is possible that, within a single trading day, you may want to place both long and short positions, depending on the market expectations that day.
Therefore, it’s key to keep up-to-date with external market events and relevant news stories that could impact prices in the market that you’ve chosen.
Monitor & Close Your Positions
Day trading is a high-speed endeavour and markets move quickly, requiring focus and dedication. Try not to make any emotionally charged decisions that may conflict with your preplanned exit point and risk management strategy.
Once you’ve reached your desired profit target or loss threshold, you should close your position.
If the position is still not at your target by the end of the day, incorporate overnight swap fees and the risk of slippage into your calculations to decide whether or not to keep it open.
A helpful tip is to keep a trading diary of all the positions you have opened and subsequently closed during the day, allowing you to identify strengths and drawbacks in your trading strategy.
Day Trading In Singapore Strategies
Day trading in Singapore is simply a trading style, not a strategy. The only stipulation for day trading is that positions are not held overnight. There is any number of day trading strategies used in Singapore that can be found online, with varying levels of complexity and success. Some of the most popular include:
- Trend Trading – This strategy involves studying asset price directions and buying or selling after a trend has been determined and consolidating. Rather than following the Wall Street adage ‘buy low sell high’, trend traders buy high and sell higher.
- Swing Trading – Swing traders take advantage of both upward and downward market movements, looking out for small reversals in a trend’s price movement and attempting to make money from them.
- Scalping – A short-term and fast-paced strategy, scalpers make lots of small, very frequent trades looking to close a position as soon as it becomes profitable, limiting the opportunity for the price to reverse and cause losses. Scalping requires a disciplined exit policy as losses can quickly undo the small profit margins.Check that your broker allows hedging or scalping
Singapore Trading Taxes
Day trading in Singapore may be a source of income, so it is important to understand any tax implications. Trading taxes in Singapore have been a hot topic in recent years and can vary significantly. According to the Inland Revenue Authority of Singapore (IRAS), capital gains from the sale of financial instruments are “generally not taxable” as they are viewed as personal investments, making them attractive for long-term investors.
However, the rules on day trading taxes in Singapore are somewhat vague, with taxable income being dependent on several factors:
- Frequency – are you making a few daily trades or hundreds? If it’s the latter, the IRAS may tax you on some of your profits
- Income – are you day trading in Singapore full-time? If not, and you only trade on the side, it’s likely the IRAS will consider your earnings as capital gains and, therefore, not taxable
- Pattern – do you trade in an organised manner, similar to that of a full-time trader?
- Finance – how do you fund your trading activities? The more methodical you are in the way you manage your capital and the more you set aside purely for trading purposes, the more likely it is that you’ll be required to pay tax
If you do have to pay taxes, it will likely be in line with the progressive resident tax rate, starting at 0% from 20,000 SGD and rising to 22% for earnings above 320,000 SGD.
Not only is a trading journal good practice for personal development, but a record of your trades is also useful for tax questions. Ultimately, you should seek clarification from the IRAS or a professional to ensure your actions remain legal. This page does not seek to offer tax advice, merely break down some of the information available.
Can I Day Trade Forex In Singapore?
Day trading forex is popular in Singapore, as are trading stocks and indices, all of which are available at most top brokers. The most popular forex pairs for day trading in Singapore are combinations of SGD and the major global currencies.
What Is The Minimum I Need To Day Trade In Singapore?
The minimum deposit amount varies from broker to broker, sometimes starting at just 10 SGD. Most platforms also charge spreads and/or commissions. Be sure to consider all associated fees before selecting your broker.
What Brokers Can I Day Trade With In Singapore?
In July 2020, Interactive Brokers opened their Singapore office so investors can now use the platform to trade in Singapore. Moomoo recently entered the online brokerage space in Singapore, offering 90 days of commission-free trading on US, SG and HK markets. Tiger Brokers also offer a low charge for every trade made and have a promotion of no minimum fee charged for Singapore stocks. There are also many other local and international brokers to choose from, some even offering an educational course to help beginners get started.
Is Day Trading In Singapore Legal?
Yes, day trading is legal in Singapore and is a popular investment strategy. Always make sure you are using a fully compliant broker that is regulated by the Monetary Authority of Singapore (MAS) to protect your investments and avoid any nasty surprises.
Is Day Trading In Singapore Taxable?
Trading taxes in Singapore are a bit of a grey area and it all depends on the frequency with which you trade, whether trading is your main source of income, your trading patterns and how you manage your trading finances. The IRAS generally states that capital gains from the sale of financial instruments are not taxable but it is best to seek clarification from them or consult a local advisor.