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Your guide to investing in Forex in 2020

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Forex traders speculate on currency exchange rates. It is a thrilling yet risky way to earn money. Here is how to access the largest financial market.
Guide on How to Invest in Forex 2020

In South Africa today, Forex investment is booming. Brokers provide remote access to the largest financial market. Traders monetize knowledge as they buy and sell instruments online. The foreign exchange is a tap or a click away, with sophisticated apps and platforms facilitating profits. In 2020, opportunities like these are vital.

When you invest in foreign currencies, you can speculate on their exchange rates. These are never static, and a well-timed trade can bring hefty returns. Here are the basics of online Forex.

Fundamental Principles of Forex

Every traveler faces the need to exchange currencies at least occasionally. You cannot pay with South African Rand in the EU – your money must be converted to Euros. For instance, as of this writing, one Euro costs 19.81 Rand.

Exchange rates are always changing, and some currencies are more volatile than others. They are affected by economic and political news. From GDP to trade deficit to geopolitical tensions, the range is wide. It is these changes that make earning on Forex possible.

Financial software allows you to buy and sell currencies for profit. They form pairs, where the base currency is followed by a quote (also ‘counter’) currency. For instance, USD/ZAR shows the price of 1 US dollar in South African Rand.

The basic principle is buying low and selling high. In this regard, Forex is similar to other financial markets. An important advantage is that both ups and downs can be lucrative. When a trader anticipates a trend, they open a long or short position and hedge risks.

Trading terminals have important features – Stop Loss and Take Profit. These must be set for every trade. The former protects you from excessive loss if the market moves against you. The latter closes the trade once the desired profit level is reached.

How to Start in 2020

Generally, Forex investment is not rocket science. You do not need a degree in finance, but it would give you an edge. People willing to learn can find a wealth of educational content online. Before you set off on your trading journey, get an account, and appropriate trading software.

1.   Access to Brokerage

The first thing you need is an account. This is where you will keep your funds for trading. Choose trusted companies the claims of which are backed by customer feedback. Your provider must also be registered and licensed for operations in South Africa.

Account credentials unlock trading terminals, such as MetaTrader 4 and MetaTrader 5. There are two modes available: demo and live. The former is what aspiring traders begin with. These accounts are offered by responsible brokers, and they offer excellent conditions for practical learning.

Clients can use their software in its simulation mode. The system will mimic real market conditions, but profit and loss are only virtual. Do not skip training if you want to succeed. A trusted brand like Forextime will provide support and guidance.

Live Forex puts your money at stake. Until you know exactly what strategy to pursue, stick to the demo mode. Learn how to use all the features and aids available. Trade management must become automatic, so you can focus on your strategy and analysis. Live accounts can be funded via different payment channels. Top brokers accept major credit cards and electronic payment systems.

2.   A Sound Strategy

There is no room for randomness. Each step you take must be based on current market conditions. Despite what critics say, Forex is not a gambling house. Traders need to make informed decisions rooted in fundamental and technical analysis.

Different strategies require different resources. For day traders, Forex is a full-time job. They begin with hours of preparation before the market opens and then spend hours trading. This style requires that all positions are opened and closed within the same day.

If you cannot devote so much time, consider swing trading. Here, positions can remain open for days or weeks. Eventually, it is all about choosing what fits your goals and opportunities. The most hurried approach is scalping. It is based on a large number of high-frequency trades. Each can last seconds or minutes.

Be Aware of Risks

No investment is completely risk-free. The foreign exchange can always move against you. High returns are never safe, especially in volatile markets. Forex trading is not for the faint-hearted, and mistakes are inevitable. Always incorporate risk management into your strategy. Use Stop Loss to limit potential damage and diversify your portfolio to include more instruments, such as CFDs.