Forex in forex trading is known as a market, or the market where currencies that exist in the business world are traded. Currency trading is a vital tool that allows for foreign trade since with forex trading there cannot be any foreign trading between countries. (Investopedia, 2017). There are a number of reasons as to why it has become popular among individuals, both amateurs and experienced, in the forex trading arena. One of the main reasons is because it has become a major source of revenue to all those who participate in it. Brokers, agents who deal with brokerage of securities, offer services to interest parties who in turn invest in specific shares as per the advice from the broker, who in turn uses the money to earn make profit which he will give to the owner of the securities on a commission. (Strathmore University, 2017). This is due to the fact that, currencies all over the world have some economic strength relative to others for example; The US dollar is one of the strongest currencies in the world meaning that if you were to exchange it for the South Africa Rand, all prevailing exchange rates and factors remaining constant, the 1 US dollar will yield more South African Rand. (Strathmore University, 2015)
Another major reason as to why forex trading has become popular is due to the fact that with the increased levels of communication; fast internet speeds and social media, traders become more aware of what is taking place in the financial world and can use the information retrieved form these sources as feedback or data to conduct their analysis as forex traders. Traders have also come up with easier ways to get their information to other traders and users through mobile apps and published online journals making the exchange of ideas fast, cheap and efficient. (EasyForexTrading, 2017)
A case in point where forex trading is greatly affecting the economic status of a nation economy is in South Africa. According to Forbes Africa reports, South Africa has one of the strongest economies in Africa and due to this, it has one of the busiest forex trading markets in Africa and the world at large. (Forbes., 2017). One of the main motivations as to why South Africans are switching their money making game play to forex trading is as a result of the lifestyle traders make. One researcher states that if one was to go to any social site and check on how they live their lives, one would note that, they live for the lavish things in life. (SAST, 2017)
The situation is not as before where individuals took no interest in forex trading and saw it as a scam, where they would be offered training in seminars and tips on how to carry themselves when it came to forex trading. Nowadays, everyone is eager to participate in the booming market for existing traders are not too shy to show off their big cars and houses which they claim to be from participating in the forex market. (SAST, 2017). One of these success stories of traders who have made a killing from forex trading is from one Hoosain Harnekar; a south African business man who decided to try his hand at forex trading after making a bad investment choice with his partner, forcing him to start a fresh. (Alfa Financials, 2017). He did not have any money and lacked the nominal fee to open up a trading account but through sound risk management and trading maneuvers and techniques, he was able to make sound investment choices thus getting a return on his investments and eventually making it in the forex trading world. He advises that one should make sure they have tripled their nominal amount in their training account before investing in the real world.
Rules & Regulations: What you need to know about the LAW
Aside from that one should be aware of the specific rules and regulations concerned with forex trading in South Africa. One of the most obvious rules and regulations is that, forex trading is legal in South Africa, and infringement of laws only occurs if you dare use brokers who have no operating licenses. This is a huge problem since most brokers in South Africa are out to get investors’ money; not many investors to be conduct research on their brokers. Also brokers in South Africa require to-be investors to have a minimum limit in the funding accounts in order to act as their agent. This is due to the fact that although forex trading is becoming popular in South Africa, it is poorly unregulated and it is not that risk averse due to the country’s currency not being that strong and not many individuals have received training on how to trade in the forex market. (SAST, 2017). All working forex markets from economies in the world provide rules and regulations to trading and one get equipped with them through training and from experience.
Pros & Cons
There are various advantages and disadvantages associated with currency trading. It is a market that very few people know about or understand. Given the fact very few people understand the inner workings of forex trading, one is bound to make a lot of profits due to minimal competition. Another advantage is that the leverage: the amount you invest in or use to fund you trading account, is substantial. This means that you do not require a lot of money to fund your account.
Some major disadvantages is that the individual must be willing to learn the craft of forex trading. This is a disadvantage because without proper risk management system and trading technique one risks losing all leverage if they place trades everywhere with no knowledge whatsoever in what is happening.
This is why training is so important; to reduce the risk of a trader losing his money every time he trades, to allow them to explore their options each time they are ready to take up leverage and invest. Training also provides willing traders and investors tips and techniques on how to analyze market trends and come up with portfolios that will ensure they get good returns if not minimal risks.