Forex or foreign exchange or simply FX, are terms used to represent the many world currencies being traded in the market. There is no single central forex market in Kenya, or the world. The foreign exchange market is more like an over the counter market and trading typically happens between two people/companies directly. You can trade currencies over the phone, or through the Internet from the world over. Some of the main forex trading centers are New York, London, Frankfurt, Sydney, and Tokyo. Due to these worldwide located hubs, the forex market pretty much trades around the clock.
What is Forex Trading?
Forex trading in Kenya or anywhere else in the world, is the buying and selling of a combination of two currencies simultaneously. This combination of trading currencies is known as ‘cross.’ For example: you can buy the Euro and sell the US dollar or you can buy Japanese yen and sell the GB pound or any other combinations. However, there are some currencies that are traded more often than others. These combinations of currencies, “crosses”, are known as ‘majors’ and include EURUSD (Euro-USD), USDJPY (USD-Yen), and GBPUSD (Pound-USD).
Another thing to remember when trading foreign exchange is that the forex market’s maximum volume of trade is known as the ‘spot market’. This is because the various trades get settled on an immediate or “on-the-spot” basis here. Typically, immediate means 2 banking days.
So How Do You Make Money?
Well, you make money by trading: buying low and selling high. One of the simplest ways to do this is by ‘forward outrights’.
Forward Outrights – simply put, this is a contract to buy an agreed amount of a certain currency at a future date and at a fixed price. For example, you could agree to buy $1,000 next month at Kshs 76 per dollar. When next month comes, if the dollar has risen to, say, Kshs 78 per dollar, then you can buy 1,000 dollars at 76 and selling them at 78, making Kshs 2 per dollar. It’s a gamble but can pay off quite well.
In the past, foreign exchange trading required huge amounts of money to start and was only for the “big boys”. However in the 1980s the rules were changed, and now even individuals can trade forex profitably and fairly easily. One major improvement is margin accounts.Basically, having a 100:1 margin account means that you can control $100,000 using only $1,000 of your own money. That said, ofrex trading is not always a smple affair. Every aspiring forex trader has to educate himself in order to make goos investment decisions. Once started, the trading is not difficult. But it is risky.
Why Trade Forex?
The advantages of trading forex and making money online are many. Some of these are:
- Around the clock trading – You can trade from Sunday evening 20:00 GMT to Friday evening 22:00 GMT.
- Higher Liquidity – You will always find buyers and sellers to trade FX with. The high market liquidity helps in stabilizing the price and narrow down the spreads.
- No commissions – Most forex trade is done without commission. This is one of the main reasons for foreign exchange trading being such as wonderful online money making choice for people in Kenya or the US.
How to Start Trading FX
To start trading, all you need a FX account with funds to buy forex and a PC with a good speed Internet connection. For beginners, we recommend sharpening your trading skills by opening a demo account with a good FX trading company. The account is free and allows you to ‘play’ with your funds to learn the trade. You can get a free practice account here or here.
In order to minimize your risks and maximize your gains, research extensively on the subject and use proper trading tools only. Do not hesitate to ask us for more information. Good luck. 🙂