The Forex is, without a doubt, the largest financial market on the planet. If you have some cash and are ready to risk your money, you can now discover how to make money on Forex while trading.
Nigeria is one of the countries that makes full use of the forex trading market since it is a worldwide market that is both accessible and decentralized. Navigating the broad and volatile Forex market, on the other hand, can be overwhelming for many newbie traders.
Forex trading has grown in popularity in Nigeria as more people enter the market. This market has helped the Nigerian economy flourish, and you may be wondering, “Is Forex Trading in Nigeria that simple?” How much earnings can you earn from trading forex part-time or full-time? What are the dangers?
In this article, we will highlight everything a beginner needs to know about the forex market and its advantages and disadvantages.
What is Forex Trading?
The buying and selling of currencies to profit are known as Forex Trading. The Forex market, an over-the-counter market where investors can trade currencies, is where traders can place their deals. Investors, institutions, banks, and retail traders can use this platform.
The international exchange market is the biggest trading market globally, with an average daily transaction of US$6.5 trillion. This is bigger than all of the world’s stock exchanges combined. Trading operations occur on the “Interbank Market,” allowing you to place transactions 24 hours a day, five days a week, Monday through Friday. Learn about the top forex platforms in Nigeria in our other article
History of Forex Trading
The exchange of flat currencies, known as forex trading, is estimated to be centuries old, dating back to the Babylonian period. Therefore, its traders must understand the market’s history and the main historical events that have shaped it. This is because comparable existences could return in different but similar forms, affecting the trading environment.
The barter system, established by Mesopotamia tribes about 6000 BC, is the oldest trading means. Goods were exchanged for other goods under the batter system. After that, the system expanded, and merchandise such as salt and spices became common means of exchange.
In the first known form of foreign exchange, ships would sail to barter for these commodities. The first gold coins were invented as early as the 6th century BC and served as a form of currency because they possessed vital features such as portability, durability, divisibility, limited uniformity, supply, and acceptability.
At a point in time, gold coins were widely accepted as a medium of exchange, but they were too heavy. So countries adopted the gold standard in the 1800s. The gold standard guaranteed that any amount of paper money would be exchanged for its gold value by the government.
This worked great until World War I, when European countries were forced to abandon the gold standard to print more money to fund the war. You can read about forex most popular news sites in Nigeria
Understanding Currency Pairs
In the forex market, every transaction is based on the purchase of one currency in exchange for the sale. So you’re trading or exchanging different currencies simultaneously, and are known as ‘currency pairs.’ Eg: EUR/USD (Euro vs. US Dollar), NGN/USD (Nigerian Naira vs. US Dollar), etc.
There are different currency pairs, including majors, minors, and exotics. Before starting trading Forex, you must first know what currency pairings mean and how they work.
Types of Currency Pairs
Major Currency Pairs: These are the currency pairs with the US Dollar as one of the currencies. The majors cover over 85% of all worldwide trading volume. They include EUR/USD (Euro/US Dollar), GBP/USD (Pound/US Dollar), USD/JPY (US Dollar/Japanese Yen), AUD/USD (Australian Dollar/US Dollar), etc.
Minor Currency Pairs: Minors are cross currency pairs, including all major currency pairs except the US dollar. EUR(Euro), GBP(Pound), JPY (Japanese Yen), etc.
Exotic Currency Pairs: These comprise one primary currency and another from a developing economy such as Brazil, Mexico, South Africa, or Russia. USD/BRL (United State Dollar/Brazilian Real), USD/HKD (United State Dollar/Hong Kong Dollar), USD/ZAR (United State Dollar/South African Rand), USD/RUB (United State Dollar/Russian Rubie), etc.
How to start Forex Trading in Nigeria?
Anyone in Nigeria can now trade Forex online, from home, or anywhere globally. To trade Forex online, all you need is a laptop, a good internet connection, a good trading technique that has been tried on a sample account, and a starting revenue.
You must register with a Forex broker. There are various brokers today; all you need to do is pick a credible one.
Finally, once you have created a trading account, we will show you how to place Forex orders and estimate your profit or loss. The following steps you need to follow to start trading Forex in Nigeria today. They include: you can also be sensitize on forex scam in Nigeria
A stable internet connection
Forex trading is done through a reputable broker who offers the essential tools to trade the markets efficiently and effectively. As a result, the most crucial step is to ensure that you have a fast and dependable internet connection.
Although a forex broker can be accessed from any web device, it’s more convenient to trade from your home. When it comes to investing, much information is needed, and it’s easier to do that on multiple displays.
Sign up with a reliable broker
The forex market is brimming with Forex brokers who offer a variety of account types, trading platforms, and analytical tools. However, while picking a broker, you must examine the broker’s track record. Substantial regulatory control from authorities like the FSCA, CySEC, or FCA ensures this.
After you have restricted your search to a few well-regulated brokers, you can use this information from your search to start trading under your preferred condition.
Allocate your investments securely
Another critical factor to consider when starting your trading career is how to manage funds. Set up a risk-adjusted investment technique instead of investing everything all at once to avoid excessive financial losses.
Choose your preferred trading platform.
The trading platform is the program you use to make trading more accessible, and there are several solutions available from Forex brokers on the market. As a newbie, you’ll want to locate a trading platform that’s easy to use, has a simple interface, has ample trading capabilities, and has quick execution.
Many new traders begin by using MetaQuotes’ MetaTrader suite, which includes MT4 and MT5, which are enough for beginners to use and provide a range of indicators, technical tools, and fast trade execution.
Pick a trading strategy.
It is critical to trade using a plan that allows you to distribute your risk while also allowing you to profit from various areas of market volatility. Trading without a strategy is trading blindly. Fortunately, the internet provides many free instructional materials to help you understand multiple methods to build a solid foundation for your trading career.
Forex Trading Strategies in Nigeria?
When trading in the Nigerian Forex market, you need to be familiar with the following trading strategies. They include the following:
This involves long-term trading. Trading for a long period of time
This involves short-term trading.
This is a form of a trading strategy where the trader buys and sells an asset within th4 same day.
Advantages of Forex Trading
Like any other market investment, Forex trading has many benefits and a lot of risks. On the plus side, it has the potential to generate a good profit if you trade with a great functioning plan and manage your risks effectively. The following are various benefits you get from forex trading:
Huge trading Volume
With a daily trading volume of about 6.6 trillion dollars, the forex market is the largest. This market is incredibly liquid, and you can easily place and settle large orders without worrying about price fluctuation due to your trade.
Start with Low Capital
Thanks to the low minimum deposit and high leverage offered by today’s brokers, you can start trading in the forex market with NGN 1000. However, it is strongly advised that you begin trading with a capital of at least $50,000 and that you never risk more than 5% of your account on a single trade.
Open 24 hours
Another significant advantage of forex trading is trading around the clock, five days a week. Unlike traditional stock exchanges, which only enable you to place and close orders during limited trading hours, these trading hours are significantly longer.
Disadvantages of Forex Trading
The following are the various disadvantages of forex trading. They include
- Higher Risk with Leverage
- Risk of Volatility
- Emotional Stress
- Avoid Bad Brokers
Forex trading is a complicated field requiring many hours of research and practice to develop expertise. It’s not always easy. Still, you should know some basic things before starting your forex trading journey. There are also changes and updates to consider when setting up your first entry into this world of markets, so be sure to research those too!
Forex traders take advantage of these changes by buying one currency when it is low in value and selling it when its value rises. Learn about forex scams in Nigeria in this our other article