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CFD Trading In Thailand

Written By

Paul Holmes

Written By

Paul Holmes

Paul has over 14 years experience in the trading industry, both as a full-time trader and working with leading brokers. He’s traded indices and forex, developed proprietary day trading techniques, and built his own MetaTrader algorithms. He excels at delivering simple-to-follow guides for beginners to experienced traders.  

» Paul Holmes Profile Page

Edited By

James Barra

Edited 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.

» James Barra Profile Page

Fact Checked By

Michael MacKenzie

Fact Checked By

Michael MacKenzie

Michael is a writer and editor with over a decade in journalism and publishing. His niche lies in editing and fact-checking content in the financial services sector, with a focus on online brokers and trading platforms. Michael previously reported on politics and economics in the Middle East and edits books for established publishers.

» Michael MacKenzie Profile Page

Updated

Nov 11, 2024

Southeast Asia’s market for contracts for difference (CFDs) has been growing, drawing in everyone from fresh-faced Thai traders to experienced investors.

Unlike traditional stock trading, CFDs let you speculate on price changes without owning the asset, meaning you can potentially profit from both rising and falling markets. But what exactly does this mean in the Thai context?

From understanding regulations from the Thai Securities and Exchange Commission (SEC) to navigating the opportunities and risks, this beginner’s guide reveals the basics before you start CFD trading in Thailand.

Quick Introduction

• CFDs allow you to trade with leverage, meaning you can open positions in Thai and global financial markets much larger than your initial investment. However, using leverage is a double-edged sword: while it can amplify gains, it can also increase losses.
• Unlike traditional stock trading, CFDs let you profit from up and down trends. You can go long if you believe, say, shares in Krungthai Bank will rise or go short if you think they will fall. This flexibility is ideal for active traders who want to benefit from market volatility.
• With CFDs, you can trade a range of assets in Thailand, wider Asia and globally, including stocks, forex, commodities, and indices, all from one platform. This variety offers an easy way to diversify your portfolio without needing multiple accounts.
• Since you’re not buying the underlying asset, CFDs often bypass some of the fees associated with traditional trading, like stamp duty. This makes CFDs a cost-effective way to access global markets, particularly if you’re a day trader in Thailand.

How Does CFD Trading Work?

CFDs offer traders access to the financial markets without the added expense and administration needed to own the actual assets.

Leverage is a core element of CFD trading. You get to control and open bigger positions but only need to commit a fraction of the total value (or margin) needed to, for example, buy an equivalent number of shares listed on Thailand’s stock markets.

To show you how it works, let’s explore a potential CFD trading opportunity on the SET Index (SETI), a Thai composite stock market index calculated by the prices of all common stocks on the main board of the Thailand Stock Exchange, except for stocks that have been suspended for more than one year.

If you’re convinced the SETI will rise, you’d buy a CFD position in the Index. If each contract is valued at 1,450, and your trading platform requires a 5% margin, then to take a position on 100 contracts, you’d need a margin of Thai baht (THB) 7,250 (1,450 per contract x 100 contracts x 5%).

If the SETI rises to 1,500, the price increase will yield THB 50 per contract. By closing your position, you would bank a total profit of THB 5,000 (100 contracts x THB 50), excluding broker fees. But, if the index falls to 1,400, you would lose THB 5,000.

This example highlights the risk of CFD trading; you can control significant size with leverage, but both the gains and losses can increase.

You need to get to grips with how margin and leverage work because it’s critical to your trading success.

If you are new to CFD trading, why not consider opening a demo trading account? It’s an excellent introduction to CFD trading; you can practice strategies and build confidence before risking real baht in the markets.

Paul Holmes

Author

What Can I Trade? 

CFD trading offers many trading opportunities in various financial markets, both globally and in Taiwan:

• Stock CFDs – You can trade individual Thai stocks listed on the SET or the individual stocks that form the SET index. Alternatively, take positions on US, UK or European stocks which are known for their high trading volumes that can equate to competitive costs.
• Index CFDs – The Set Index (SETI) can be traded as a CFD. The SET Index is a Thai composite stock market index calculated by the prices of all common stocks on the main board of the Stock Exchange of Thailand. Many CFD dealers prefer trading market indices to capitalize on a stock exchange’s overall performance rather than invest in individual shares. You could also consider trading global index CFDs like the Dow Jones or S&P 500. Liquidity is always high in these popular indices, as is the trading volume.
• Forex CFDs – The THB is one of the fastest-growing currencies worldwide and is actively traded in the foreign exchange market. Popular Thai currency pairs include USD/THB and JPY/THB. These currency pairs have high liquidity and can provide opportunities for short-term currency traders interested in trading THB.
• Commodity CFDs – Critical global commodities such as gold, silver, crude oil and sugar (Thailand is amongst the largest producers) can be traded as CFDs, allowing traders to speculate on their price movements, which are often linked to macroeconomic events.
• Crypto CFDs – The fascination and excitement over trading digital assets has reached Thailand. Traders can trade cryptocurrency CFDs like Bitcoin and Ethereum bringing fast-paced opportunities and high risks in equal measure.

Is CFD Trading Legal In Thailand?

CFD trading is accessible to Thai traders but operates within a bit of a grey area.

The Thai Securities and Exchange Commission (SEC) hasn’t formally regulated or endorsed CFDs, which means no Thai-based brokers are authorized to offer CFD trading locally.

However, Thai residents are allowed access to CFD products through international brokers who accept clients from Thailand. Many of these brokers are licensed in regions like the UK (under the FCA) and Australia (under the ASIC), giving Thai traders indirect access to regulated CFD services.

This comes with its own set of considerations.:

• Since Thai authorities don’t regulate CFDs, they also don’t provide local investor protections specifically for CFD trading. This can mean that resolving disputes or legal issues with an international broker may be more complex.
• Thai traders may also face currency exchange risks and should consider any fees associated with global trading, such as foreign transaction fees.

While CFDs are accessible to Thai traders, they should approach CFD trading with a clear understanding of the potential risks and ensure they choose reputable international brokers that operate under recognized regulatory authorities in line with DayTrading.com’s Regulation & Trust Rating.

Paul Holmes

Author

Is CFD Trading Taxed In Thailand?

CFD trading profits can be subject to taxation in Thailand, though the specifics depend on the type of income and individual circumstances.

1. Capital Gains Tax – In Thailand, capital gains from investments, including CFD trading, may be subject to taxation. For individuals, capital gains are generally included as part of personal income, taxed on a progressive scale from 5% to 35%. While there’s no separate capital gains tax, profits from CFD trading might be classified as part of your overall income.
2. Foreign Income Taxation – Profits from Thai residents trading with international brokers are often deposited in foreign accounts. Thailand has specific rules about foreign-sourced income: if income earned abroad is remitted to Thailand in the same calendar year, it may be taxable. It may be exempt if the income is brought into Thailand in a different calendar year. It’s a technicality, but it can be significant for active traders.
3. No Stamp Duty – One benefit of CFD trading in Thailand is the absence of stamp duty, which applies to the transfer of ownership in traditional stock trading. Since CFDs don’t involve actual asset ownership, this duty doesn’t apply, making CFD trading potentially more cost-effective.
4. Record-Keeping and Reporting – While many traders manage their own tax reporting, keeping detailed records of all CFD transactions, profits, and losses is wise. This can simplify the tax reporting process and help ensure compliance with Thai tax laws.

For CFD traders in Thailand, consulting a tax advisor can clarify the specifics based on your situation, especially if you have substantial profits or trade frequently.

Paul Holmes

Author

An Example Trade

To bring this all to life, I’ll take you through a CFD trade I made on a Thai stock – BTS (BTSG).

Background

BTS Group Holdings Public Company Limited (BTSG) is a public company in Thailand. It is the majority shareholder of Bangkok Mass Transit System PCL (BTSC), the operator of the BTS Skytrain and the Bangkok BRT.

BTSG operates in several areas: mass transit (through the Bangkok Mass Transit System Public Company Limited), media/advertising, property/real estate, and associated service businesses.

It has holdings in around 57 subsidiaries, jointly controlled companies, or associated firms, and it groups its operations into three segments: “MOVE,” “MIX,” and “MATCH.”

Fundamental Analysis

You must do your homework on a stock from a fundamental standpoint before you engage in your technical analysis. However, you’re not looking to invest or position trade as a short-term trader. Therefore, your fundamental analysis shouldn’t take hours; you must develop analysis skills that take minutes.

I have a standard list of metrics that can help me make a decision by providing a snapshot of the company’s recent performance and market sentiment. Typically, I look at the:

• 52W range
• P/E ratio
• EPS (earnings per share)
• Net income
• Gross profit margin
• Net income
• 1-year change

You can find these metrics easily on sites such as Investing.com.

Then, I search free financial sites, like Google Finance and Yahoo Finance, for analyst recommendations.

Depending on your broker’s package, you might get access to subscription services for free as part of your package. Also, look for stock screening software services that may not require a subscription.

Technical Analysis

If I trade a stock as a CFD, I do it on a swing trading basis, as the costs of day trading a stock can often be expensive, especially on an overseas market accessed through a European broker.

With that in mind, I’m careful about selecting the time frames on which I base my decisions. To swing trade, I prefer to apply my preferred technical indicators to either a 2HR or 4HR timeframe. I’ve discovered they generate excellent feedback for the period I intend to trade – hours or days, not weeks or months.

I’m also careful to use technical indicators that have served me well for swing trading; the RSI and MACD, both left on their standard settings, work well in combination.

The RSI helps me identify volume/volatility and oversold/overbought conditions. Meanwhile, the MACD helps me pinpoint momentum and trend development.

If I use a candlestick like Heikin Ashi that helps illustrate price action, I should, in theory, have my bases covered to make quick in or out, buy or sell decisions.

2HR Timeframe

The 2HR chart above shows three distinct stages from left to right: a ranging period, a bullish period, and a reversion to a ranging period.

As bulls take control, the RSI rises above the 50 median line, indicating increasing volatility.

The HA price action is bullish; higher highs are printed, and the candlesticks are full-bodied. The MACD EMAs cross, and the histogram changes to a bullish reading.

The RSI eventually moves into the overbought zone, and the most recent candlestick formation indicates a ranging market, which causes me to evaluate the trade’s sustained trend and momentum.

So, once the trade moved into significant profit, I moved my stop loss order to 4.80. I was then in an effectively free trade, having already banked profit.

I decided to hold over the trade because the swap fees are reasonable; I’ll review my position once the market reopens.

I have a target price of 5.00. If price prints that recent high, I’ll exit, as such a round number might have many sell orders clustered.

Bottom Line

CFD trading offers a flexible and dynamic way for Thai investors to participate in global markets without directly owning assets.

While CFDs are accessible through international brokers, residents should remain aware of Thailand’s regulatory grey area, the associated risks, and the potential tax obligations on earnings.

Having a well-informed strategy and consulting with financial or tax experts when needed can help maximize the benefits while managing the risks.

To get going, turn to DayTrading.com’s choice of the top CFD day trading platforms.

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