Trading of foreign currency is an ever-growing market. This type of trading is fast-paced and unpredictable with potential for high risk as well as great rewards. Now more accessible to less affluent individuals, forex trading provides an array of individuals with opportunities for creating wealth.
What is forex trading? Here are a few basic concepts:
Foreign Exchange trading, commonly known as Forex Trading is the buying and selling of different global currencies.
The prospective trader acquires an amount of money in the currency of their choice (known as the base currency). The goal is to sell off currency for another.
The hope is then for the second currency’s value to increase relative to others in the near future.
In order to make considerable gains, currency traders must watch the market carefully and should pay attention to global trends. Expert traders will keep up with trends in politics and economics – which can predict the movement of the market.
The most popular currencies traded include the US dollar, pound sterling, Japanese yen, the euro, the Australian dollar and the rand.
How to get started:
- Find a suitable broker. Brokers specialise in buying and selling currency on the market on your behalf.
- Make sure that the broker you find is properly qualified and registered.
- It’s important to gain an in-depth understanding of how the market works. It’s an ongoing learning process, so do the necessary research. A simple way of learning is by setting up a free demo account online which allows you to trade as a “ghost” on the market using fake money.
- Analyse your risk tolerance and focus on a single currency pair initially. Be patient and stick to your plan.
Trading in South Africa:
Forex trading is based on the notion that the net value of the initial investment can be increased over time by converting it to other currencies that are worth more.
Changes take place on a 24-hour basis.
Online brokers are currently prevented from trading by law. All South African Revenue Services (SARS) regulations must be followed.
Some restrictions apply to exporting currency. There are specific fees and limitations that apply when moving large sums of money. The low value of the South African rand can compound this problem, making it more expensive in general.