In South Africa, online trading is increasingly popular. This year, due to lockdowns, millions of people around the world have discovered the potential of Forex and other markets. These are easily accessible through mobile devices, allowing work whenever and wherever you like. How much can you possibly earn, and is it truly worth trying?
Online trading is a field comprising several markets and hundreds of instruments. Traders usually start with the currency exchange, as it is the least complex. They grow their portfolios by adding stocks, precious metals, and derivatives like contracts for difference. Eventually, you may create a diversified selection of instruments that brings substantial profit with minimal risks. But first, how do you access this world of opportunities?
How Markets Work
Take Forex, for example. Currencies are valued against one another, forming pairs like EUR/USD. Their rates are always changing, as they are affected by myriad factors of political and economic nature. Oil prices, elections, geopolitical tensions, and other drivers may cause ups or downs in the market.
Traders may capitalize on these changes if they foresee them with the help of technical or fundamental analysis. For instance, if you trade USD/ZAR, and you know that the South African currency is going to strengthen, you can buy more rands today to sell them at a higher price in the future. On the other hand, when a fall is predicted, traders short sell their currencies and buy back more lots after the foreseen decline.
Therefore, trading is a constant maneuvering between rises and falls in the market. Profits are the monetization of your foresight and smart risk management strategies. Any trends can work to your advantage if you are only able to foretell them.
Size of Initial Investment
The same broker may offer different types of FX trading accounts for the various entry requirements. The lowest deposit of only $10 can allow you to access the market with a so-called cent account. For example, ForexTime offers it.
Of course, the more you can invest, the faster you can see a high profit. Still, traders should not take excessive risks in their pursuit of spectacular games. In general, you should never risk more than 1% of your capital per trade. Otherwise, your account will deplete quickly. Mistakes in Forex are inevitable-even experts make them at least occasionally. The key is not to eliminate losses-which is impossible-but to keep them under control. That is why traders need to start with a demo account and develop a solid multifaceted strategy before they can trade with real money.
How Much Can One Earn?
It depends on multiple factors: initial investment, trading style, risk tolerance, types of FX trading accounts, etc. Of course, you should not expect to make a million if you can only invest $10. Still, with calculated steps, you may gradually improve your profits. Day traders may achieve a 10% monthly return after half a year of trading.
A lot also depends on your use of leverage. The system allows you to open positions worth more than your deposits - often, much more. For example, the ratio reaches 1 to 1,000 for some instruments, which means you can initiate a trade for $100,000 when there is just $100 in your account. Trading on margin increases your potential profits. Who wouldn't like to make a hundred or a thousand times more than they would otherwise?
At the same time, leveraged trades are highly risky, as they involve borrowed capital. A single rash move may wipe out your account. Of course, thanks to negative balance protection, you will not end up in the red, but leaving empty-pocketed is hardly a desirable prospect. Therefore, only experienced participants use leveraged trades.
Where to Begin
Aspiring traders need a registered account with a brokerage. The demo version allows them to practise on their trading terminal with no risk to their budgets. The live analogue gives access to the real financial markets. Both types are easy to register, and credentials are emailed shortly. To create a live account, you need to upload a few documents so the broker can check your identity.
Today, Forex scams are ubiquitous, especially in countries where legislation is imperfect. Traders from Africa should choose companies with an official licence and registration. The FCSA and international watchdog organizations like the FCA in the United Kingdom or the CySEC in Cyprus approve the best brands. It guarantees that your funds and sensitive data are safe.
So, can Forex make you richer? If you start with ten bucks, getting rich is a very tall order. However, it can and will make you richer if you treat it seriously.