FOREX TRADING

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What is it?

Forex(Foreign Exchange) is the buying and selling of currencies with the aim of making profit. Currencies are treated like commodities which can depreciate or increase in value. Traders basically make money by predicting the direction of price of currencies. If you predict correctly, you make money, and if you are wrong, you lose your money.

How much are we talking about?

Forex done right is a highly lucrative activity. It is possible to grow your money from several tens of thousands to a million in one year. At the very least, when you’re an outsider who has never been involved in Forex, that is the impression you’ll get when you first encounter it.

However, just as people can make millions in Forex, so do other people lose millions. I know of comrades who have lost tens of thousands of money, even their entire HELB loans, through Forex. The point here is that Forex is a highly risky business.

The nature of the Forex market is such that even the most experienced traders can’t be 100% certain in their predictions. They deal with some risk. This risk is multiplied in the case of newbies who are desperate to make money and yet are unwilling to take time to learn the trade.

What do you need?

To trade in Forex, you first of all need money. Some time ago, you needed to have a sizeable amount. However, at the moment, the local forex scene has changed in such a way that you can trade with as little as a few thousand shillings. Keep in mind the high risk associated with Forex, which means that you need to have enough money to survive making losses.

Secondly, you need a broker. As an individual, you are too small and the only way you can trade in forex is through a broker. You will therefore need to find a broker who has the best terms for you. Thanks to mobile technology, you can trade in Forex from the comfort of your smartphone. Finding a broker can therefore be as easy as downloading an app on Play Store and depositing money through M-Pesa.

Additionally, to be able to analyze the market correctly, you will need a firm grasp of current affairs and their implications on the forex market. This means that you need to stay up to date.

Finally, and this is the most important part, you need to have the necessary knowledge and skills. To predict the trends in forex, you need to make informed decisions after careful analysis and not just guessing. Otherwise, you will end up losing your money. Such knowledge and skills take time and dedication to acquire.

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What are the challenges?

  1. High Risk. As a beginner, there’s an extremely high probability that you will lose all your capital. However, as you gain the necessary knowledge and skills, the risk of losing money decreases.
  2. It takes a long time to master the forex trade in such a way that you can profitably trade from it.
  3. Trading capital. To make substantial profit requires that you trade using a large amount of money, which may be a barrier to comrades.
  4. Greed. If you can’t control your greed to make high profits as a beginner, you will most likely end up losing everything.

Forex Academies

As a beginner in Forex, the chances of making it on your own are slim. Fortunately, there exist forex academies dedicated to teaching you how to trade. Such academies also provide you with a community of traders who help each other, for example by letting beginners use high probability predictions that have been made by experts within the academy.

The catch is that you have to pay to be part of such academies. Original costs of getting into the academies range from sh.8000 to sh. 25,000. Such memberships are periodically renewable. Some are renewed after a month while others give you up to three months.

The idea is that after you’ve paid the initial amount and been given some skills, for example for one month, you’ll start making money and will find it easy to pay the subsequent subscription skills. To get you to pay the initial amount, the academy will make you believe that you’ll be able to earn comfortably after a month. However, it is difficult to gain enough knowledge over one month and you will be dependent on the academy for some time before you can begin making money on your own.

An alternative to forex academies is to teach yourself about Forex on the internet. All the information that you could possibly need is on the internet. The challenge will be to know how to best make sense of the information.

Demo Trading Accounts

Before you go risking your hard earned or hard borrowed cash in Forex, it is a good idea (more like standard procedure actually) to test your trading skills in a demo account. A demo account is where you get to trade in the real life market environment but with false money.

Only when you feel confident in your skills should you proceed to risk real money. To get a glimpse of the Forex world, you can download the app MetaTrader, which allows you to trade using a demo account.

Beware of some Apps

If you spend time on the internet, you will most likely have bumped into ads for Forex Trading Apps such as ExpertOption and IQOption. May I point out that there exists a huge difference between such apps and the real Forex trading market.

The problem with these apps is that they have short trading windows, such that you make predictions for what is going to happen in the next couple of minutes. The problem with a short trading window is that you are basically forced to guess. Forex requires careful analysis of a lot of factors to predict what will happen to price and should ideally have no time limit; such that if I buy a currency today, i can hold on to it for a month.

The above apps take away the privilege of time, limiting your prediction window to a few minutes, which makes it hard to take informed decisions. The result is that you will lose a lot more of your money because effectively, you’re always guessing.

Conclusion

It takes time and a lot of hard work to gain proficiency in Forex. Forex trading is also naturally risky and you will make some losses. It is also costly to get into academies that will give you the required knowledge and skills to trade.

However, if you do find a way to get the skills, Forex will make you rich. I know of a nerd in second year who drives a car from Forex money.

The one thing that I hope is very clear is that Forex is not a shortcut into wealth. And it definitely is not a get rich quick scheme.

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Silicon

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