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Forex Trading In Ukraine

Written By

Royston Wild

Written By

Royston Wild

Royston is an experienced investor and writer. His expertise includes stock recommendations through to commodities, forex, and macroeconomic news. Royston's background includes roles as a stocks and commodities reporter, and editor of forex coverage at Shares Magazine.

» Royston Wild 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

Oct 18, 2024

Despite geopolitical challenges, interest in forex trading is increasing in Ukraine following regulatory changes and a steady rise in the number of online trading platforms.

In this beginner’s guide to forex trading in Ukraine, we talk about popular currency pairings, discuss the best times to trade, and walk you through how regulation and taxation work in the Eastern European country.

We’ll also show you what a trade involving Ukraine’s official currency – the hryvnia (UAH) – might look like.

Quick Introduction

• Ukraine’s forex market is modest but growing as access to brokers improves and retail trader protections have been revamped.
• Traders can exchange the local currency, the hryvnia (UAH), against a wide range of regional and global counters. However, major pairings such as the USD/JPY and EUR/USD are more popular with day traders because of their greater liquidity.
• The National Bank of Ukraine (NBU) and the National Securities and Stock Market Commission (NSSMC) work together to regulate and supervise Ukraine’s forex market.

How Does Forex Trading Work?

Forex trading involves exchanging one official global currency for another. When an individual trades the UAH/USD, for instance, they are swapping the Ukrainian hryvnia for the US dollar.

When a trader takes a long position, they buy the first currency in the pair, known as the base currency, while simultaneously selling the second currency, the quote currency. Adopting a short position works in the opposite way.

Ukrainian traders can trade the hryvnia against a range of major currencies. Such pairings include the following:

• UAH/USD (versus the US dollar)
• UAH/EUR (versus the euro)
• UAH/GBP (versus the British pound)
• UAH/JPY (versus the Japanese yen)

However, trader interest in dealing the UAH tends to be relatively weak. This reflects limited price volatility, which in turn depresses profit-making opportunities, and higher dealing costs due to wider bid and ask spreads.

As a consequence, active traders in Ukraine tend to focus on more globally popular pairings like the EUR/USD and GBP/USD.

Certain brokers allow trades to be conducted using the UAH instead of major currencies like the euro or dollar. This can make dealing currencies simpler and more cost-effective thanks to the elimination of forex conversion fees.

DayTrading.com has created a list of top brokerages offering hryvnia-based accounts.

Royston Wild

Author

Is Forex Trading Legal In Ukraine?

Yes. Lawmakers have worked to improve the functionality, transparency and effectiveness of the country’s forex market.

In 2019 the Law of Ukraine on Currency and Currency Operations was introduced to overhaul Ukraine’s outdated regulations and bring them closer to European Union standards.

The act has had several positive impacts for retail traders. Today it’s much easier to access the services of a foreign broker, for instance, while dealers also have less paperwork to deal with, pay lower transaction costs, and enjoy greater confidence in the credibility of Ukraine’s currency market.

Both the National Bank of Ukraine (NBU) and the National Securities and Stock Market Commission (NSSMC) are responsible for regulating the country’s forex market. The latter body is classified as a ‘yellow tier’ regulator in DayTrading.com’s Regulation & Trust Rating.

The NBU is tasked with ensuring overall market stability, and issues licenses to ensure financial services providers are operating properly.

Meanwhile, financial instruments and activities that intersect with currency trading are regulated by the NSSMC, such as forex CFDs.

Our investigations show that neither the NBU nor NSSMC publish lists of brokers that are approved to deal in Ukraine’s forex market.

But don’t despair. Most of DayTrading.com’s best forex trading platforms accept Ukrainian traders and are trusted by other reputable bodies.

Royston Wild

Author

Is Forex Trading Taxed In Ukraine?

Yes. Serious traders pay income tax at a flat rate of 18% to the State Tax Service of Ukraine (STS). This is the body responsible for administering Ukraine’s tax system and collecting revenues.

In addition to income tax, individuals also pay a military tax at a rate of 1.5%. This was introduced in 2014 to help the country rebuild its armed forces.

When Is The Best Time To Trade Forex?

Traders have an opportunity to trade currencies 24 hours a day between Monday and Friday. However, market liquidity is higher at particular times, which can make for simpler and more profitable trading.

In Ukraine, the best time to do business is between 14:00 and 19:00 Eastern European Time (EET). This is the country’s official time zone. It is two hours ahead of Greenwich Mean Time (GMT).

This window largely coincides with the opening of financial markets in New York and afternoon trading in London. And so traders get to enjoy the benefits of higher trading volumes.

A Forex Trade In Action

We’re now ready to think about what a currency trade might look like in action. In this example, I’ll be buying the UAH while simultaneously offloading the USD.

The Background

My plan is to make a profit after the NBU makes its next interest rate statement.

The research I’ve conducted suggests the central bank will raise rates to 13.25%. This differs from the broader market, which seems to have priced in a hold in the NBU’s lending benchmark at 13%. If my hypothesis I correct, the UAH/USD pairing may well appreciate.

I arrive at this conclusion after studying a raft of domestic data, including Ukrainian inflation numbers, growth figures and labor statistics. Studying the latest commentary from NBU rate-setters and economist reports also informs my decision.

Alongside this, I conduct technical analysis to assist me in identifying potential entry and exit points for my trade. Successfully identifying chart patterns, trendlines and indicators based on past price movements and volume data is an important part of short-term trading strategies.

The Trade

The NBU is due to make its interest rate announcement at 14:00 EET. This is ideal for me, as it’s at the start of the window when trading volumes in Ukraine start to peak.

I open my trading platform at 13:50, giving me ample time to place my trade. At this time, the UAH/USD pair is trading at 0.024593. At this level, I can buy approximately 41 hryvnia for one buck.

My trade involves two steps:

• Establishing a ‘take profit’ order at 0.024645. This will automatically close my trade if the pairing rises to this level.
• Inputting a ‘stop loss’ instruction at 0.024561. This will also shut my position automatically in certain circumstances, in this case if the UAH/USD falls to my pre-selected level.

Risk management tools like this are essential in the fast-moving forex market. They allow traders to lock in profits or limit losses on their dealings, and help them to reduce or eliminate emotional influences on their money-making strategy.

Royston Wild

Author

Within a few minutes of placing my trades, the NBU makes its interest rate announcement. As I’d predicted, the benchmark is raised to 13.25%, and the UAH/USD appreciates in value afterwards.

Eventually it moves through my ‘take profit’ level of 0.024645, closing my trade in the process. This gives me a profit of 52 pips.

Bottom Line

On a global level, Ukraine’s forex market is extremely small. However, thanks to a blend of better regulation, improving broker access, and increasing interest in trading markets, transaction volumes are steadily on the rise.

Traders can use local brokers or ones in overseas markets to do business. Whichever path they choose, dealers should ensure that the company they choose is licensed to deal by a respected regulator.

Short-term forex trading is a risky business, and individuals should never put down money that they can’t afford to lose.

To get started, turn to DayTrading.com’s top brokers for day trading forex.

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