This article evaluates the facts and lies behind Forex trading in Kenya. Have you ever wondered just how profitable Forex trading is? What are the chances that you will make millions like those who claim to be making millions?
Well, this article up explains why someone who says they became a millionaire from trading Forex is most likely telling a lie. It was originally written by Wallace Kantai.
People who claim to be making a killing in Forex trading will get extremely emotional and scream like banshees about how ignorant those who don’t buy their story are. They’ll say they are making millions from the trade. Just don’t ask to see their bank balances.
Forex trading is the category of strategies that promise to make you money. Trainers will tell you to attend a few sessions of instruction, read a few books, or attain a few months of experience.
In everything involving gain and loss of money, there is one keyword; risk.
Risk Factors in Forex Trading
Risks govern everything.
So what are the risks in this business? There are several, and many are quite severe.
1. Forex is not a National Currency
Most countries in the world have their currencies. Some countries share one such as the Europeans in the euro-zone and in West Africa which shares the CFA Franc. Some countries use currencies for other countries such as Zimbabwe; until recently.
The different currencies have different values against each other. Since 1971, these currencies have freely ‘floated’ against each other, meaning that their values move against each other freely.
What gives a currency value? Ultimately, it is a reflection of the country or the currency zone’s underlying economy. But, day to day, and month to month, these values will fluctuate. This then is an opportunity to trade.
2. Players Have Backup Capital
The foreign exchange, or Forex market is an active one. Different players are in the Forex market for different reasons.
Central banks trade currencies to keep their respective nations afloat. Central banks generate foreign currency, commercial, investment, and merchant banks.
In turn, hedge funds will buy and sell currencies, for their respective reasons. Increasingly, some players trade foreign exchange as if it was just another commodity.
3. Availability of Resources
In trade, there are commodity traders who never consume the commodities they trade.
These players exploit every tiny movement of one currency against the other, buying and selling and making or losing money in each of these little interstices. Most are remarkably deep-pocketed, trading billions of dollars in a day, and moving with remarkable speed.
As with most foreign exchange nowadays, the internet has turbocharged the market. Certain technological and regulatory rules have changed making it possible for people to enter this business easily.
With little more than a computer or even a mobile phone and an active internet connection, one can join the market. this has in turn compromised the quality and honesty in the market.
4. Need For Long-term Engagement
Now, an important caveat. Forex trading is like a see-saw. When the person on one side of a trade is up, the other is down; win-lose, profit-loss. It’s what’s called a zero-sum game. The broad idea is to make sure your wins are greater than your losses, long-term.
Why Do Companies Have a Better Shot at Forex Trading Than Individual Traders?
The principal players are massive entities like multinationals, investment banks that you hear of only on CNBC. and Bloomberg.
These institutions have billions of dollars to play with, hire the best and brightest PhDs in maths, physics, and computer science, and buy the most powerful computers.
They deploy algorithms and artificial intelligence (AI) to ensure that they can exploit the most minuscule advantage. Not just that, but they also have access to the best, latest and fastest information.
An example: a Bloomberg terminal costs 2.5 MILLION shillings a year, and you have to have the smarts to decipher the flood of information it spits out, profitably.
They trade round the clock, with offices and traders and trading rooms strategically placed around the world. Such that by the time you wake up, they have been absorbing information, incorporating it into their thinking, and trading for hours.
That is your first risk. There is no chance that you can deploy the firepower these guys have, and it is not a fair fight.
Two, there’s an entire industry built around convincing amateurs that they can trade and win; books, and convincing-looking online courses. But don’t forget that the true industry here is not trading – it is the books and courses! $100 here and $50 there. Who’s paying? You.
Leverage is another power in play when it comes to Forex trading. Put some money down and trade a multiple of the amount. Sounds like a deal, especially when you’re winning. But when you’re losing, there goes the proverbial shirt.
You’re in with only $500, trading $5,000. When there is a margin call there goes your money. Can you win? Yes. Can you win consistently? Much lower chance. Can you win long term and become a millionaire? I think not.
How To Do Better in Forex Trading
Online trading, especially Forex, is not for the faint of heart, or amateurs.
If you think you are really good and can make lots of money the best thing to do is, apply for a job in these investment banks and hedge funds. You can also work for the treasury department of a mid-sized company.
This will give you an arena to learn more about the money market. By the time you join Forex trading, you will be experienced enough to understand the dos and don’ts of the market.
You are also advised to consult the Capital Markets Authority. You’ll ultimately need them to protect you were things to down-hill.
Forex trading is not as simple as people are made to believe. It involves risks and needs a lot of knowledge. Follow Bizna Kenya for more updates and information on foreign exchange.