The forex trend: is it worth it?
It is a wave that has taken SA by storm. Everyone is talking about forex trading as means to make a quick buck. But is worth it? We find out.
Foreign exchange market or forex is the form of investing where you can potentially profit from the movement of currencies. Currency trading involves significant risk and individuals can lose a substantial part of their investment as it depends on daily market value; the exchange rate is the main factor that determines profitability in trading.
Forex is different from any other investment products. It’s not exchange traded which enables investors to respond to fluctuations in currency prices as they occur - day or night.
Mthandeni Mncube, a trader, says he can make R300 000 a month. “I was introduced by a friend while in varsity and he taught me what I needed to know. He was in trading already and gave me my first R13 000 to start with so I opened an account and started trading myself. Trading depends on the situation and our economy but it’s been seven years now and I think I know when to buy and sell. I would say on average I can make up to R300 000 a month.”
However, Tyson Mthembi wasn't as lucky when he first started forex trading last year. “I saw on people getting into trading and got intrigued so last year I started watching YouTube videos and taught myself through the Internet. I opened an account with R1 800 and lost that in the first week, then I tried again in my second attempt. I invested R20 000, which I lost in a month. But, now I’ve gained experience and see gains; it isn’t a fixed amount that you can make a month as trading isn’t guaranteed but I now I make about R5, 000 in a month.”
Here are some things to consider before trading:
Do your research
You have to check the stockbroker’s qualifications and accreditation. There are a lot of scam artists out on social media claiming to be traders.
Senior specialist for currency derivatives at the stock exchange, Elaine Mabiletsa says, “It’s critical for investors who intend to use forex trading to do proper research and stay abreast of all factors that may influence the currencies they trade in.”
No instant solution
There isn’t a get-rich-quick scheme. “The idea behind forex trading is not to get huge amounts of profit every day or instantaneously, but rather to work towards making smaller returns daily that will translate into bigger profit monthly,” says Mabiletsa.
Advantages and risk
Mabiletsa advises: “Currencies are volatile, investors who use forex trading purely as an investment tool need to realise that there’s no guarantee they’ll make profit. However if it is used for hedging or protection, you’re certain to lock in future returns than taking risk of investing and never knowing whether or not you’ll get profit.”
So if you want to try it, do so wisely.