Forex is booming in Africa; how can you get involved? Keep reading to find out.
9 Reasons Why Professional Forex Trading Can Be a Good Career in Nigeria
The Foreign Exchange Market,
the world's largest trading market, exchanges US$6.5 trillion every day. This
is greater than the total value of all worldwide stock markets. Monday through
Friday, the "interbank market" is open for trading 24 hours a day,
seven days a week.
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1. How can I learn about forex trading?
Have you traveled abroad?
You've most likely traded currencies before because you must exchange some of
your dollars for the currency of the host country. Assume you exchange 410,000
rupees for USD 1,000 to travel. Your Naira-to-US-dollar conversion is
authentic. When you exchange Naira for another currency to pay for your
vacation, you are engaging in a forex transaction.
The market rate plus the
money changer's margin is your exchanger's rate. If the NGN-USD rate is 410,
most money changers will give you 420. Your currency exchanger earns 10
(420–410) per USD. Foreign exchange via the internet is similar to visiting a money
changer, although it involves more effort.
2. Pairs of currencies
Foreign exchange trade is impossible without the exchange of currencies. The simultaneous purchase and sale of two currencies are referred to as a "currency pair." EUR/USD, NGN/USD, and so forth.
Only three of the hundreds of
currency pairings are major, minor, and exotic. Before you can trade forex, you
must understand currency pairings and how they function. This chapter offers
information on all currency pairings. Let's get started.
3. Types of Currency Pairs
There are three major
currency pairings:
Currency pairings with the US
dollar are considered "major." The world's major trading centers
account for more than 85% of total trade volume. Popular currency pairs include
the euro, pound, Japanese yen, Australian dollar, Swiss franc, New Zealand dollar,
and US dollar/Canadian dollar. Because the majors see the most activity, they
are liquid and easy to enter and exit positions. Earnings have increased.
4. Currency pairs ranging from common to uncommon
All major pairs, with the
exception of the US dollar, are considered minors. Examples are the euro,
British pound, and Japanese yen. Euro/Japanese yen, euro/pound, pound/Japanese
yen, and so on. The main currency crosses, except the US dollar, are shown below.
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5. Trade may be hampered by a lack of liquidity and volume.
An exotic currency pair is
formed by combining a major currency pair with a currency from a developing
economy such as Brazil, South Africa, Mexico, Russia, and so on. Brazilian
real/US dollar, Hong Kong dollar/US dollar, South African rand/US dollar,
Russian ruble/US dollar, and so forth. Exotic pairs are more volatile, have less liquidity, and have greater
spreads than major and minor pairs. For new forex traders, the four major
currency pairings provide stability and consistency.
6. Currency Bid and Ask Rates
When you open a forex trading
account, your broker will quote the bid and ask price to buy and sell
currencies. It will be cited in the literature. The EUR/USD rate is 1.281215.
The broker quoted the price.
Pip: A penny fraction used in
monetary quotations (given by the broker). The final cost figure The final
decimal place slips one pip if a quotation is changed from 1.2811 to 1.2812.
Third, the "bid price" is your broker's offer to purchase one
currency from you. This rate enables the selling of base currency. Brokers show
this price to the left of the quotation ticker. If the rate is 1.2812/15, that
means you can sell one euro for 1.2812 US dollars.
Ask Price: A currency pair's
broker's offer to sell. This purchases the base currency of the pair. The
broker displays it to the right of the quotation ticker. The second figure in a
quotation like EUR/USD 1.2812/15 is the "ask price," which informs
you that you may purchase one euro for 1.2815 dollars. The spread between the
bid and ask prices will be provided by the broker. The spread in this example
is 0.0003 or 3 pips, or 1.2815 minus 1.2812. Forex firms with low spreads are
vital. Spreads are charged by forex brokers (you should also check the overall
fees).
7. How to Get Started in Nigerian Forex Trading
Nigerians may now trade
currency online. You can make money trading forex online with a laptop, an
internet connection, a strong trading technique tested on a demo account, and
at least $50,000. (although many brokers have much lower deposit requirements).
Finally, once you've established a trading account, we'll demonstrate forex
orders and profit/loss computations.
8. Trade!
You may begin trading after
creating your live account and depositing real money with your forex broker.
The forex market is divided into two positions: long and short.
To decide whether to buy or sell, examine trading charts or market news.
Long positions entail
purchasing a currency pair in the belief that its value will rise. If you
believe the euro-US dollar exchange rate will rise to 1.25, you may place a buy
order for euros and a sell order for US dollars.
The result of a successful Foreign Exchange Long/Buy Order is shown below. Long forex order
Purchasing foreign exchange
is similar to purchasing shares. You make a profit after buying the currency at
a low cost. When a currency is expected to decline in value, it is
"shorted." Place a sell order if you believe the euro/dollar exchange
rate will fall to 1.0 from 1.10. See the example of a forex sell order profit
below.
Short Order in Forex
To earn a profit, you can
sell the currency at a higher price and then repurchase it at a lower price.
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9. Completion
Close your deal for profit
(or not). Expenses or earnings? The currency pair in which you traded
determines whether you make or lose money after a transaction. A trader who
places a buy/long order on the EUR/USD currency pair but exits after the pair's
price rises by 100 basis points is not uncommon. You can break even by trading
1 mini lot and earning $100 before commissions. Assume you exit the trade when
the EUR/USD falls by 100 points. You're down.
Let's go over our scenario again to make sure everything is clear. A "short" bet at 1.0000 would benefit if EUR/USD fell below 0.9900. Profit is determined by position sizing (based on account size and leverage). If the EURUSD reaches 1.1000 and your stop loss is set at that level (or you don't have enough margin to keep the trade open), you will lose 100 pips because the price has shifted back in your favor.
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