11 reasons why forex trading is exploding in Africa, and why it matters
A look at currency trading in Africa
In recent years, and especially during the past few
months, with the emergence and spread of Covid-19 on a global scale, the Forex
Market has seen a surge in new African traders joining the trading environment.
There are now daily increases recorded in the Forex Market as more traders discover opportunities and possibilities in trading Forex.
There are various reasons as to why more African traders are joining the Forex Market and a lot of them comprise of severe uncertainty pertaining to employment and security of income, strict lockdown measures confining people to their homes, and more.
Forex Trading provides the perfect platform for people to not only occupy their time, but to provide an additional, and/or alternative, income in such trying times.
Why is Forex Trading exploding in Africa?
As more traders join the Forex Market, it is important to look at why this may be, what exactly it is about the Forex Market that is drawing in more traders on a daily basis.
1.The Forex Market is the Largest Market
There are quite a few financial markets, and while each accounts for its own traders, the Forex Market is still the largest, with trading transactions to the value of over $5 trillion occurring on a daily basis.
None of the other markets can even come close to this as currencies have to constantly be exchanged to conduct foreign business, amidst various other reasons.
2.More liquidity and lower transaction costs
Due to the vast amount of transactions that occur, the Forex Market is highly liquid and due to this, transactions can be executed at high speeds, resulting in the lowering of transaction costs.
Should the Forex Market have been less liquid, the opposite would apply. African traders are taking advantage of lowered transaction costs to be able to start trading Forex, and to open more positions that will allow them a chance at greater gains.
3.Currencies are strengthening once again
Despite Covid-19, there are factors such as political and economic conditions that drive the prices of currencies in either an upwards or downwards direction.
The emergence and spread of Covid-19 has destabilized numerous countries that have been greatly impacted by the virus, Africa is not excluded from this with a lot of African currencies seeing a weakened state against major currencies such as the US Dollar.
But with a slow and phased reopening of various economies, and businesses being able to open their doors once more, a lot of currencies are growing in strength against the major global currencies.
4.Accessibility to the Forex Market
The Forex Market is one of the easiest to access through a Forex broker, and apart from this, Forex is traded 24/5 despite the time zone that traders are in.
African traders can access the Forex Market at any given time as the markets are always open, as soon as one closes, there are a few others that are open.
In addition to this, Forex trading does not require that traders be seated in front of their desktop computers for the greater part of the day, trades can easily be executed from anywhere, at any time, by making use of mobile trading apps.
5.It can be done part-time, fulltime, or as a hobby
With various lockdown and quarantine procedures in place, a lot more people have been confined to their homes and forced to work remotely providing a lot of traders with the opportunity to explore, learn and apply new trading strategies to accommodate this.
There is no given time during which African traders can execute trades, as long as it is done between when the trading day of markets open or close, unless traders are willing to pay overnight fees for positions held open for longer than the trading day.
For traders who work remotely, or those on the move, trading can be done at any time, which leaves a lot of possibilities open.
6.Variety of Forex Brokers that cater for different trading needs
There is a vast amount of Forex Brokers that African traders can choose from, provided that the trader's country is supported by the broker that they choose.
Brokers offer various, comprehensive, and competitive trading conditions and African traders can open an account with a broker from as little as $0, it should just be noted that traders need to explore the broker's offering to verify any additional fees.
Regardless of the trader's level of knowledge, skill and experience, there is bound to be a broker that caters for the trader's needs according to their trading plan and the outlining of finances, limitations, time restrictions, exposure to risk, and more.
7.It does not require substantial capital, and leverage is a useful tool
African traders who start out in trading Forex have found that when evaluating various brokers, trading, and non-trading fees, that they can start trading without a substantial amount of capital.
Leverage is used to open larger positions despite the initial deposit or the trading account balance of the trader, providing traders with the chance at great gains, but simultaneously, using leverage incorrectly can lead to the incurrence of great loss.
Brokers offer traders a certain level of leverage which is determined by the countries in which the broker may operate along with the regulatory entity through which they are authorized and regulated.
A lot of brokers are bound by such regulation in an attempt to minimize the risks associated with using leverage to trade financial instruments.
Brokers offer leverage of between 1:1 and even up to 1:2000. Brokers who are regulated and authorized by the FCA, for instance, can only offer traders with leverage of 1:30 when trading Forex major pairs.
8.The option of using Hedging
Traders use this to limit the amount of funds that they stand to lose in a given timeframe by making several investments which have inverse price action relationships.
By using this, complimentary trade orders are placed along with multiple orders placed in opposite directions in which a price is moving, in an attempt to earn greater profits by locking an exchange rate in place when opening a trade.
9.The existence of Safe Haven Assets
A lot of African traders may feel a bit too intimidated by trading Forex mid-Covid-19 due to the frequency and severity that price movements are occurring, but a lot of traders have started investing in safe haven assets.
These assets include currencies such as JPY and CHF in which price movements are not as severe or volatile.
Although, African traders need to keep up to date with economic and political situations that occur in safe haven countries that may indicate a price movement.
10.Anyone can start trading Forex
This remains as one of the main reasons why more African traders have started trading Forex, and it correlates with previously mentioned reasons.
It does not cost a fortune, although traders need to compensate for fees and possible losses that may exceed their initial capital.
African traders also have a world of information at their fingertips when they start trading, and by using guides, tutorials, seminars, and various other educational sources, anyone can learn how to trade Forex.
Forex trading is also more accessible due to African traders executing their trades from a variety of devices such as desktop computers, tablets, laptops, and mobile phones.
The possibilities and different ways in which African traders can approach the Forex Market are endless. There are numerous brokers, trading platforms, currencies to trade and strategies to use when trading Forex.
No two traders are the same, and whether traders qualify in the beginner, advanced, or professional class, even here there are numerous differences as different strategies work for different traders.
There are numerous reasons pertaining to the sudden explosion in trading specifically where Africa is concerned, varying from personal reasons, professional choices and even just the adoption of new and different hobbies.
But there are some fundamental reasons and benefits that can be derived from the Forex Market that indicates and substantiates the reason for the sudden influx, and these are but a few reasons.
Traders need to take note of these reasons as it reflects on a global scale, and in addition to this, with influxes in the Forex Market, it possesses the potential for changes in market conditions along with changes in price movements of currencies.
This article was submitted by SA Shares.