Given that around $6.6 trillion is traded daily in the global Forex market, it stands to reason that this sector should be highly attractive for aspiring investors across the globe.
While there’s no doubt that you can make money and secure a viable profit as a Forex trader, however, this market is also incredibly volatile and capable of generating disproportionate losses over time.
In this post, we’re going to look at if Forex Trading a Profitable Business for Africans, type of forex market, and market size and the rest and how business owners can you utilize strategy and tools to optimize their chances of achieving success?
The Size and Scope of the Forex Market
As at today , the total value of the Forex market has also increased exponential markedly in recent times, from $1.934 quadrillion in 2016 to a staggering $2.409 quadrillion by the end of 2019.
This, increased daily trading volumes, highlights the raw appeal of the marketplace, and the sheer amount of money that continues to be invested overall by traders.
However, it’s important to produce a caveat here, despite the immense and growing size of the forex market, some estimates suggest that around 70% of traders in this space lose money regularly over time.
This represents an incredibly high ratio of losing trades, with this arguably underpinned by a fundamental misunderstanding of Forex and a desire to pursue quick and seemingly easy profits.
Another significant factor facing traders is leverage, which can be a double-edged sword that has the potential to trigger both out sized profits and substantial losses. Leverage is expressed as a multiple of your initial deposit, and it enables you to open and control disproportionately large positions with a relatively small deposit.
Make no mistake; increased leverage will raise your market exposure and force you to take on more sizable risk, potentially undermining the value of any profits that you’re able to make as a trader.
What is forex trading
The forex trading is one of the most popular forms of investment in Africa, especially among young people. It is relatively low-cost, available 24 hours a day, and can be accessed from both mobile devices and computers. Anyone with a mobile phone and 10 dollars to spare can get involved.
This involved buying one currency while selling another. Traditionally, a lot of forex transactions have been made via a forex broker, but with the rise of online trading you can take advantage of forex price movements using derivatives like CFD trading.
Forex, also known as foreign exchange or FX trading, is the conversion of one currency into another. It is one of the most actively traded markets in the world, with an average daily trading volume of $5 trillion. Take a closer look at everything you’ll need to know about forex, including what it is, how you trade it and how leverage in forex works
All brokers will offer a demo account, which behaves exactly the same way as a live trading account except the money is virtual. Most good brokers will offer a demo account that never expires. Having an unlimited demo account means you can test your strategies and practice what you have learnt without taking any risks at all.
Forex trading is high-risk speculation and 60-90% of traders will lose money, depending on their Forex broker. Most traders lose money because they haven’t created (or don’t follow) a risk-management strategy that keeps losses to a minimum.
Types of forex market:
We’ll also look at types of forex market tips you can start using right now, so you can get back in the game.
1. Spot forex market: the physical exchange of a currency pair, which takes place at the exact point the trade is settled – ie ‘on the spot’ – or within a short period of time
2.. Future forex market: a contract is agreed to buy or sell a set amount of a given currency at a set price and date in the future. Unlike forwards, a futures contract is legally binding
3. Forward forex market: a contract is agreed to buy or sell a set amount of a currency at a specified price, to be settled at a set date in the future or within a range of future dates
How to Optimize Your Chances of Being a Profitable Trader
Ultimately, there are several ways in which you can increase your chances of success as a trader, characterized by or being an extremely rapid increase particularly by controlling the amount of leverage that you take on through each individual trade.
For example, while some reputable brokers offer leverage of up to 2001, this creates the potential to incur significant losses if your trades turn against you. So, you should manage and restrict your leverage in line with your wider strategy and appetite for risk, as you look to strike the ideal balance between risk and reward.
We’d also recommend experimenting with different leverage and strategies in forex trading, simply by making the most of a so-called “demo account”.
You can use this type of brokerage account for between three and six months, while accessing a completely simulated and real-time marketplace where you can hone your strategies without risking your hard-earned cash.