FOREX TRADING, THE SLEEPING GOLD MINE IN THE DIGITAL AFRICAN ECONOMY
Forex trading could be challenging at first, but once you understand how it works it could be easy and a profitable way of generating that extra coin you require to supplement your income. But one thing I can assure you, it’s not a get rich overnight affair as you’ve heard. It takes patient and discipline to cash in the profits. There’s a huge untapped potential in the forex market, it’s like a sitting gold treasure waiting to be explored. This is a sleeping gold mine in our digital African economy that should be tapped.
So what is Forex?
Forex or Foreign exchange is the global market in which foreign currencies are exchanged or traded by banks, brokers and traders. Did you know that approximately, $3 trillion is exchanged on the forex market on a daily basis? This makes forex the largest most liquid market in the whole world.
Forex trading on the other hand, is the act of exchanging one foreign currency into another. The one that takes place physically over the counter(OTC) when you are exchanging bank notes is still forex trading. However the one I’m referring to is one that occurs through interconnected computer networks across the globe among traders through online brokerage companies like XM Global and FBS.
How does forex trading work?
The unique thing about it is that no one controls the forex market. The market is always open 24 hours a day, 5 business days a week. That means anyone anywhere around the world can place a trade at any time of the day within the week. When a trading day ends in your time zone, the market is open in another time zone.
Predominantly forex trading was an affair of government institutions and large banks, but that is in the past now. Today forex trading is retail-oriented and any person above the legal age can open an account with online brokers as a trader or an investor and begin venturing into their market of choice (Currency pairs , CFDs/Stocks, Cryptocurrency assets).
What do you trade in a forex market?
Currently there are three major markets you can trade in; Currency pairs, CFDs/Stocks and Cryptocurrency assets.
Lets break down the currency pairs. This is the most traded market globally and the most viable option for most traders.
Some of the commonly traded currency pairs are: EUR/USD, GBP/USD,AUD/USD,NZD/USD,USD/JPY,USD/CAD,EUR/GBP.
Trading a currency pair means placing a buy or sell trade of a certain lot with a speculation that the price/exchange rate will move. Buying simply means you’re speculating that the price will rise in future from the current one. For instance if I buy AUD/USD at 0.7185, I’m speculating that the price will increase from 0.7185. If indeed the price increases lets say to 0.72300,my trade would be in profit. The reverse means I’ll be in loses.
On the flip side, selling a currency pair means that you’re speculating that the price of that pair will fall in the near future. Let’s take the example of the AUD/USD. If I sell the pair at 0.72300, I’m speculating that the price will decrease from the current price. If the price actually falls as speculated e.g to 0.7185 my trade will be in profits. On the contrary, my trade will be in loses.
Does this sound tricky to you? It’s not tricky once you understand what drives the market. It’s simple and easy to interpret once you learn about the movers and shakers in this market. Tune in into the next articles as we explore more on matters forex trading.
It’s the second most traded market after the currency pairs. Stock market refers to shares and other forms of securities of businesses which have been publicly listed for members of the public to exchange. Some of the most commonly traded stock indices include: US100 Cash or NAS100, US 30,NASDAQ, GER 30.
Buying and selling of stock indices is the same as that explained earlier in the currency pairs. The only difference is that the change in price is much larger in stocks as compared to that in currency pairs.
This is the new market to be include for trading. Just like in currency pairs where, cryptocurrency assets involve cryptocurrency and fiat.
Some of the most commonly traded cryptocurrency assets include: BTC/USD,BTC/EUR,ETH/USD,ETH/EUR,LTC/USD,LTC/EUR,DASH/USD,XRP/USD.
Metals: Gold abbreviated as XAU/USD, Silver abbreviated as XAG/USD
Futures: these are forecasts such as USDX-SEP21
Oil: the major oil indices include Brent Oil, WTI (West Texas Intermediate) and OPEC.
Tune in into the next articles as we explore more on matters forex trading, blockchain news, cryptocurrencies and associated technologies.
Collins dictionary: https://www.collinsdictionary.com
Metatrader 5: https://www.metatrade5.com