In the past year, especially the past few months, with the spread and emergence of Covid-19 on a global scale, there has been a substantial surge in Forex trading especially in African countries as more traders have started entering the Forex Market.
More African traders are discovering new opportunities and possibilities, and there is an array of reasons why more African traders are taking to the Forex Market whether to secure income, or additional income, or as a new hobby.
Forex Trading and the market provides African traders with the perfect platform and avenue not only to occupy their time, and refine their trading skills, but as a great way through which they can gain great profits.
There are more Forex brokers who attempt to draw in traders from over the world, not only to expand on their client base, but also to diversify their portfolios of offerings and compete against others in offering more favourable trading conditions.
When considering the conditions of all global markets, the Forex market, against all odds, has remained stable despite the global pandemic, given that the market has seen substantial volatility due to constantly changing exchange rates of currencies.
A substantial amount of traders who have existing strategies to harness such volatile conditions, along with those who have had ample chance to learn and become more skilled, have had ample opportunity to gain profits with the volatility of the Forex Market.
Why Forex Trading has exploded in Africa
The Forex Market is the largest market globally
There are numerous markets which have their own sets of financial instruments and asset classes which can be traded, but the Forex Market is the largest with trading transactions to the value of more than $6.6 trillion occurring daily.
There is a continuous exchange of currencies for a variety of reasons contributes greatly to not only the volatility of the Forex Market, but the liquidity as well which subsequently increases execution speeds on trades and lowers transaction costs greatly.
Weaker currencies have shown rates of strengthening
The price movements involved with exchange rates on various currencies are greatly impacted by factors such as political and economic conditions which can drive the prices on currencies in either an upwards or downwards direction.
Numerous countries have seen destabilization when keeping the global pandemic in mind and a lot of African currencies have seen a weakened state against dominant currencies such as the US Dollar, amidst several others.
With the slow and phased reopening of various economies and economic activities, businesses have been able to open their doors once more, and a lot of African currencies have shown improvements against other major global currencies.
More liquidity and lower transaction costs
As previously mentioned, the Forex Market is the largest market due to the volumes it experiences daily, along with the volumes that are traded, which makes it the most liquid market in the world.
Due to the volumes of traders and their trading volumes, there is no short supply of buyers and sellers, which substantially lowers transaction costs on trading. This leads to tighter spreads which often start from 0.0 pips, lower commission charges, and more.
Accessibility to the Forex Market
Due to the importance of currency and the volumes which are traded on the Forex Market, it is one of the easiest markets to enter at any given point. The Forex market is open 24/5 and can be accessed despite the time zone of traders.
African traders can access the Forex Market easily and trade with ease as there is always a market which is open, despite one closing.
Forex trading also offers traders with a variety of ways through which Forex can be traded and does not require the trader to be seated in front of their desktop or terminal. Forex trading can be done from mobile devices such as tablets and smartphones.
Forex Trading can be done part-time, fulltime, or as a hobby
There have been various lockdown and quarantine procedures that have been in place since the spread of Covid-19, but despite this, Forex has always offered various traders with ample opportunities to trade.
African traders have a variety of options when it comes to Forex trading along with various short-, medium-, and long term strategies which can be applied along with the opportunity to explore different platforms, Forex pairs, and trading styles.
Forex Trading does not require a substantial amount of capital, and leverage is a useful tool
African traders must ensure that they have a trading plan which outlines their different trading needs and any limitations that they must be faced before entering the trading industry and choosing a Forex broker.
African traders must ensure that they are able to sufficiently compensate not only for their trading and non-trading fees, but also ensure that they have enough capital should they be faced with any losses while trading.
Leverage is a tool which is used to open large positions despite the initial deposit or the trading account balance, if the margin requirement of a specific trade is met after leverage has been applied.
Leverage can provide traders with the opportunity of making great gains, but simultaneously, when used incorrectly, it can lead to substantial losses that may exceed the trader’s capital should they not have negative balance protection on their account.
There are various maximum levels of leverage that traders have access to, depending on individual brokers and their regulatory entities through which they are authorized and regulated, along with the trader’s jurisdiction and often, their level of experience.
Hedging can be used
In Forex trading, with exchange rates and prices on currencies moving frequently, and often swiftly, in either an upwards or downwards direction, traders can use hedging to limit the amount of funds that they stand to lose within a specific time frame.
It is done by making several investments which have inverse price action relationships and in using this, complimentary trades are placed along with multiple orders in opposite directions in which a price is moving.
The goal behind using hedging is to provide the opportunity to earn greater profits by locking an exchange rate in place when a trade or position is opened.
A lot of African traders may feel intimidated by trading Forex especially when considering the impact that Covid-19 has had on global markets but despite this, Forex trading may seem too daunting because of the effect of political and economic circumstances.
Regardless of the frequent and exaggerated shifts in prices, traders have the option to invest and trade in safe-haven assets such as JPY and CHF which are presented with less severe and volatile price movements.
African traders, however, need to ensure that they stay updated with any economic and political situations in these countries as these are two of the driving factors behind price movements.
The possibilities in which and the different ways through which African traders can approach and enter the Forex Market are endless despite the African trader’s trading needs and objectives, and different levels of skill, knowledge, and experience.
There is a great variety of Forex brokers, trading platforms, currency pairs, trading styles, trading strategies, and more, to choose from when trading Forex.
No two traders are the same and there is no holy grail where successful Forex trading is concerned, each African trader will set out to trade Forex for their own reasons, and by making use of demo accounts, traders can refine their trading to suit their own needs.
The Forex market is accessible, and anyone can start trading, and this remains one of the main reasons why more African traders have started trading Forex and why Forex trading is exploding in Africa as it correlates with reasons previously mentioned.
Forex trading does not require a large amount of capital to start off with and although traders need to understand their financial situation and plan accordingly to ensure that they have some starting capital, the possibilities for great gains are endless.
There is a world of information at the fingertips of African traders who want to start, and for those who need information on how to refine their skills. There are numerous guides, educational sources, tutorials, seminars, and more, to support Forex traders.
Each African trader has their own reason why they want to trade Forex, but statistics show that in the past few months there have been a great number more traders who have approached the market.
Traders need to take note of the reasons provided in this article as to why there is an explosion in the Forex market in Africa and in addition to this, continuously monitor the factors that drive the Forex market and price movements in currencies.
Staying up to date with such factors will not only aid African traders in keeping up with conditions affecting their own local currency, but it will aid them in understanding how their local currency performs against other global currencies, whether major or minor.