The Philippine Peso (PHP) is the official currency of the Philippines. The central bank of the Philippines also known as Bangko Sentral ng Pilipinas (BSP), is responsible for issuing and regulating PHP, alongside other Forex related topics that affect the market.
PHP is actively traded on the Forex market, however, the liquidity is not great. It should be noted that good liquidity is very important in financial trading. Here are some key reasons why liquidity is so important:
- Liquidity ensures that prices in the currency market reflect the true value of assets. When market liquidity is high, there are many buyers and sellers actively participating in trading, which leads to competitive pricing. This allows traders to enter and exit trades at the best possible prices.
- Good liquidity results in tighter spreads. Often brokers include trading fees in spreads. In addition, traders experience market spreads that are the result of the difference between the bid and the ask prices. In liquid markets, the spreads tend to be tighter since there are many participants willing to buy and sell at various price levels. Tighter spreads reduce trading costs and increase profitability for market participants.
- Liquidity ensures traders that trades can be executed quickly and efficiently, resulting in a faster order matching and trade execution. Which is particularly important for intraday traders, and for those utilizing high-frequency trading strategies.
- High liquidity reduces the risks of slippage. Slippage occurs when a trade is executed at a different price than expected due to market volatility or lack of liquidity. Reduced slippage improves trading performance and helps traders achieve better trade outcomes.
- Liquidity provides traders with increased trading opportunities. Good liquidity enables traders to use certain trading strategies, such as scalping and day trading.
- A liquid market is less prone to market manipulation compared to illiquid markets. It is difficult for big players to make a significant impact on asset valuation when trading volume is too large.
Trading philippine peso in Forex
When it comes to Forex trading with Philippine peso, day trading is less profitable than swing and position trading. You can view the hourly chart of US Dollar against PHP below. It is easy to see that the market lacks liquidity and the price makes huge jumps.
The only way PHP Forex trading can make sense is when it’s traded medium and long term. Swing and position trading are two common strategies for trading medium and longer term. Below you can see the daily chart of USD vs PHP.
Swing trading involves keeping positions active for a few days to several weeks. Swing traders analyze price patterns, technical indicators, and market sentiment to identify potential swing highs and lows, where they can enter or exit positions to make profits. This is one of the most popular strategy amongst best traders in Philippines that made very big profits.
Position trading is a longer term trading strategy that aims to make money from significant market trends. Position traders typically hold positions for weeks, months or years. They mainly focus on fundamental analysis, macroeconomic factors to identify trading opportunities.
PHP Forex trading tips and tricks
There are many pros and cons of trading PHP in Forex that should be considered before opening a trading account. As already mentioned, intraday trading using the currency would not be profitable. However, swing and position trading could work for certain individuals.
When opening a trading account for swing trading, it’s best to select the account type with trading fees included in spreads, and zero commissions. This way you’ll be able to save trading costs. Brokers usually offer two account types, spread (markup) free accounts and commission free accounts. Active traders such as intraday traders prefer spread free accounts, while position and swing traders prefer commission free trading.
PHP trading in Forex comes with certain risks and it’s critical to do your market research thoroughly before entering a trade. In addition, you should always use proper risk management strategies and manage your emotions.
Alternatives to trading PHP
As already mentioned, high liquidity is critical for day traders. In addition, medium and long term traders can also benefit from high liquidity by getting more trading opportunities. The most liquid trading pairs in Forex are major currencies, such as:
- EUR/USD: Euro vs US Dollar
- USD/JPY: US Dollar vs Japanese Yen
- GBP/USD: British Pound vs US Dollar
- USD/CHF: US Dollar vs Swiss Franc
- USD/CAD: US Dollar vs Canadian Dollar
- AUD/USD: Australian Dollar vs US Dollar
- NZD/USD: New Zealand Dollar vs US Dollar
In addition to having a high liquidity and tight spreads, information on the major currency pairs is easily available for order planning and analysis. Central bank announcements, political events and other economic news is widely accessible on the internet.
FAQs on whether Philippine Peso is a good currency to trade with
What is the highest exchange rate for Philippine peso?
The highest historical exchange rate for the Philippine Peso against the US Dollar occurred in September of 2022. The PHP was traded at over 59.00 level.
What factors affect Philippine peso price?
Philippine peso currency pairs in Forex can be influenced by a variety of factors such as: the overall economic conditions of the Philippines, inflation rate, GDP growth rate, interest rates, employment levels, and government fiscal policies. In addition, trade balance with foreign countries, tourism and direct foreign investment play a significant role. Moreover, FX trading using Philippine peso is impacted by political and economic stability within the country and abroad. Global economic factors such as global pandemics, inflation and global warming can impact the value of PHP.
Are there FX brokers offering accounts in PHP currency?
Yes, there are CFD (Contract for Difference) brokers that offer trading accounts denominated in PHP. These brokers allow traders from the Philippines to deposit funds and trade using their local currency. However, when selecting a broker for FX trading with peso in Philippines, it’s important to pick the broker that’s regulated by a reputable financial regulator.