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CFD Trading In Malaysia

Written By

James Barra

Written By

James Barra

James is an investment writer with a background in financial services. As a former management consultant, he has worked on major operational transformation programmes at prominent European banks. James authors, edits and fact-checks content for a series of investing websites.

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Edited By

Jemma Grist

Edited By

Jemma Grist

Jemma is a writer, editor and fact-checker focused on retail trading and investing. Jemma brings a unique perspective to the forex, stock, and cryptocurrency markets and works across several investment websites as a researcher and broker analyst.

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Fact Checked By

William Berg

Fact Checked By

William Berg

William contributes to several investment websites, leveraging his experience as a consultant for IPOs in the Nordic market and background providing localization for forex trading software. William has worked as a writer and fact-checker for a long row of financial publications.

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Updated

Jul 24, 2024

CFD trading in Malaysia is an emerging market and one of the biggest in South East Asia. CFD trading is legal whether you are using a local approved, regulated brokerage or a foreign provider. This page will examine everything you need to know about CFD trading in Malaysia, including leading platforms and strategies.

The Best CFD Brokers

How CFD Trading In Malaysia Works

CFD trading is growing in popularity in Malaysia and across the world. A Contract For Difference (CFD) is an agreement between two parties to pay the difference of an asset’s price between the open and close positions. CFD trading in Malaysia allows users to speculate on the price of an asset without needing to pay the full price.

CFDs are derivatives, so investors do not own the underlying asset, which makes it possible for commodities to be easily invested in, without needing to take possession of 100 barrels of oil, for example. CFDs are available on a range of assets, including Malaysian stocks, indices, cryptos and commodities.

The Malaysian Ringgit (MYR) is not commonly used as a base currency in Malaysia. Instead, you may have to exchange your Ringgits for USD in order to open an account and begin trading.

The government of Malaysia allows CFD trading with the services of licensed institutions, regulated by the Securities Commission Malaysia (SC). Foreign providers may also be used for international investments. If your company is not regulated by the SC, check it is regulated by another reputable body, such as the CySEC (Cyprus Securities and Exchange Commission) or the UK’s FCA (Financial Conduct Authority).

CFD Trading Example

Consider a scenario in which you believe the price of crude oil will rise. For a bullish price movement, you would want to buy the asset. When CFD trading in Malaysia, this would be called going long.

If the price of oil is 50 USD per barrel and you have 5,000 USD that you would like to invest, you can go long with your provider, staking 5,000 USD. If the price then rises to 60 USD per barrel, you would close the position and walk away with 6,000 USD, a 1,000 USD profit.

For spot trading, to make the same investment you would purchase 100 barrels of crude oil. You would then need to transport and store the oil until the price had risen to a sufficient value, before needing to transport it to your buyer. While the price of the asset could have gone up the same amount, you would have additional costs and would need to spend more time on the trade.

Other asset classes have similar ownership transferral costs, if less extreme. Clearly, CFD trading in Malaysia is much less cumbersome than spot trading, especially for commodities.

Pros Of CFD Trading In Malaysia

With a careful and considered strategy, CFD trading in Malaysia can bring advantages:

• Leverage: CFD trading in Malaysia can be carried out using leverage, which can increase your market exposure and profit potential.
• Delivery: The lack of delivery can make the investment in certain assets much less of a burden, particularly commodities like wheat or natural gas.
• Shorting: One of the key selling points of CFDs is the ability to go short. This means that you can speculate on the value of an asset falling, making money from the amount by which the price drops.

Risks Of CFD Trading In Malaysia

• High-Risk: CFDs can be a risky way to trade, especially when taking advantage of leverage. All investors should ensure they understand the risks involved before they start trading CFDs in Malaysia.
• Overtrading: Many online CFD firms in Malaysia have low minimum deposits. This can make it very easy to fall into overtrading. Using a strategy and effective risk management skills will prevent you from overtrading.

Choosing A Malaysian CFD Brokerage

Finding the best platform for your trading style and requirements is subjective. Some of the major things to consider include before you start CFD trading in Malaysia include:

Regulation

Not all providers will be regulated by the SC (Securities Commission Malaysia). If they aren’t, check they are regulated with one of the major European or Australian bodies such as the CySEC or the FCA. Regulation will help protect your investments and offer compensation in case of insolvency.

Leverage

Leverage rates will vary amongst platforms and asset classes. If margin trading CFDs in Malaysia is your plan, find a company that offers high leverage rates on the instruments you wish to trade.

Fees

Most will make their money from either a commission charge or from spread mark-ups. There may also be fees for transactions, holding positions open overnight and currency exchange. Fully compare the pricing of each provider as you will want to limit how much your profits get eaten into.

Platforms

A good platform can give you an edge when CFD trading in Malaysia. Many providers will offer MetaTrader 4 (MT4) or MetaTrader 5 (MT5), two popular trading platforms in the global investing community. That is not to say other options won’t suit you better. Things to look out for include charting options, analysis tools, asset support and additional features, like automated or social trading options.

Some providers may also provide a mobile application of their trading platform, letting you trade on the go and keeping you abreast of profitable opportunities.

Accounts

Firms often have a range of available account options suited to different types of trading, asset classes or experience levels. Companies regulated by the local SC may also offer Islamic accounts that allow CFD trading in Malaysia. These accounts are Halal and suited to Muslim traders as they do not charge overnight holding fees.

Markets

Not all companies will support CFD trading in every Malaysian market available. If you have any instruments or asset classes in mind, such as Bitcoin (BTC) or Maybank (MLYBY), you should check the platform facilitates access. You can check market access on a provider’s website, or by opening a demo account and having a look.

How To Start CFD Trading In Malaysia

If you’re thinking of CFD trading in Malaysia, we’ve prepared a straightforward guide to get started:

1. Open An Account – Once you have found a platform, sign up and open a live account.
2. Identify An Entry Point – To ensure you make a successful trade, you should find a market and use analysis tools or a strategy guide to find a trend and identify a place from which to enter a trade. You can go long if you believe the asset value will rise, or you can short it if you think it will fall.
3. Manage Your Risk – When CFD trading in Malaysia, it is important to implement a proper risk management strategy. This might involve setting stop loss and take profit orders, limiting position sizes or hedging risk.
4. Monitor And Close The Position – Monitor your position closely as some markets can be volatile, and the use of margin can amplify any losses you might incur. When you are satisfied with the result, close the position and cash out.

Taxes For CFD Trading In Malaysia

Profits made from CFD trading in Malaysia may fall under income tax classifications and be taxed at a progressive rate. This is up to 26% for retail clients. Ensure you keep a detailed record of your trades so you can accurately report your income for tax purposes. Bear in mind that you may need to take exchange rates into account if you are using an account with a base currency that is not the Malaysian Ringgit. You should always consult a professional tax advisor if you are unsure about your tax status.

Final Word On CFD Trading In Malaysia

Malaysia has a growing digital industry and is becoming a popular location for CFD trading. Income tax is relatively low and traders have access to a huge range of markets. Getting started with CFD trading in Malaysia is a simple process, though it is easy to get sucked into overtrading or taking large risks, especially with the prospects of using leverage. Be sure to implement a rigorous strategy and robust risk management approach to limit your losses.

FAQs

Is CFD Trading In Malaysia Legal?

CFD trading is perfectly legal in Malaysia. Residents can trade with providers that are regulated by SC Malaysia but can also invest their money abroad and use foreign platforms.

What Is The Best Platform For CFD Trading In Malaysia?

MetaTrader 4 and MetaTrader 5 are two of the most popular platforms in the industry, though there are many great alternatives. CFD providers in Malaysia may offer their own proprietary software for desktop or as a mobile app. Demo accounts are a safe way to test different options.

Is CFD Trading In Malaysia Safe?

CFD trading in Malaysia can be safe or risky, depending on how you approach it. Using regulated platforms, limiting the use of margin and being careful with risk can help you keep a handle on your capital.

What Markets Can I Trade CFDs In Malaysia?

Traders in Malaysia have access to both local and international financial markets. CFDs are available on forex, stocks, cryptos, commodities and more.

Is CFD Trading In Malaysia Halal?

Brokerage firms registered by SC Malaysia may provide users with an Islamic account. These accounts are considered Halal as they do not gain interest from you holding positions overnight. Many foreign platforms also offer CFD trading with Islamic accounts.

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