By Jude NJOKU, with agency reports
ABOUT two years ago, many Nigerian businessmen and even civil servants desirous of making quick returns on their investments lost millions of Naira to some persons who claimed to be trading on Forex. The fad then was to have agents who on behalf of the Forex trader, offered mouth-watering profits to the investors.
Some investors were promised as much as 50 percent of their investments as long as they were able to make a minimum contribution of one million Naira. The profit margin varied from one Forex trader to the other and depended largely on how much you were able to contribute.
Today, many of those who invested their lifeâ€™s saving into Forex are biting their fingers and cursing the day they took the decision to invest their hard-earned income and borrowingÂ into the business. Instead of falling into the hands of fraudsters who offer ludicrous profits and parade as online Forex dealers, you should learn the art and do it yourself.
The acronym Forex expands Foreign exchange. A report in Ilikeinvesting.com said Forex denotes all transactions wherein the currency of one country is traded with that of another country. Forex trade, according to the report has vastly contributed to the growth of international trade.
â€œForexÂ trading is also done online. There is intense competition in the forex market because the value of currency at foreign exchange rate determines the nationâ€™s economy and stake in the international market (to a large extent). Online forex trading system has made things easier.
Forex market is not only important to the individual countries but to the entire globe. Forex in simple terms means the exchange of a countryâ€™s currency with the equivalent value of another countryâ€™s currency. The rate of currencies changes everyday. You must also keep another important fact in mind. While you trade the currencies, the exchange rate will be determined on the basis of the market value of the currency on the date when the transaction was agreed and not on the date of making the transaction.
Forex trading online implies that you can exchange the foreign currencies by the click of your mouse. The only thing required is internet connection and authorization or approval of Forex trading. Online forex trading has made it possible even for small traders toÂ transact with the currencies of other nations.
However, forex is very risky and the investor may have a reverse fortune if he is not cautious enough. The prime reason for the risk is due to the innumerable foreign currencies involved and the rapid pace at which they fluctuate.
What should you learn before entering the Forex market?
You must have a reasonable and sound knowledge about market behaviour. It is not possible to enter the market and then learn about the nuances. That idea will be a risky proposition by all means. Besides you must have a good understanding about the international business and economics. These are crucial in determining the exchange rates.
Basics of FX market
You have to closely monitor the exchange rates and then buy or sell them at a profit. For this purpose you must have an eye on the currencies traded frequently and that are not traded often. A fair idea about inflation and deflation in different countries will make your job much easier. You will be able to make profits if you buy currencies when their prices fall and sell when they increase and vice versa.
Similarly, factors like political instabilities, import and export policies of individual nations and domestic activities would affect the exchange rate.
There is an important point to be considered while dealing with forex transactions. Even though internet functions 24 hours all over the globe trading activities are always restricted to the business hours of the particular country/countries. Hence you must be aware of the time zones before entering into trade. If you do not have a clear idea about this your efforts and calculation might go waste.
Technical analysis of forex transactions are usually done by financial experts. Technical analysis implies the use of statistical and mathematical instruments to study the behaviour of foreign exchange currencies. This is based on research of the market behaviour. The idea is to predict the buying and selling prices in advance and act accordingly for getting more profits.