Forex Trading in Zambia – The Basics
Here are the basics you need to know in relation to Forex trading in Zambia. In forex trading, you buy and sell currencies and make money by taking advantage of price changes. Whenever you trade, you are actually making two transactions – you are buying several units of a particular currency while simultaneously selling another currency. This is why the value of currency is expressed as an exchange rate – its value relative to that of another currency.
To illustrate, the current exchange rate of the Zambian Kwacha (ZMK) vis-à-vis the US dollar (USD) is 1:0.00019. This means that one ZMK is worth $0.00019. Conversely, one US dollar is worth 5195 ZMK.
How do you make money from forex trading? Here is a simple example. Let’s say you decide to trade the USD/ZMK currency pair when the exchange rate is 1:5195. You buy $100, for which you pay 519,600 ZMK. If the exchange rate moves to 1:5200, you can sell your $100 and get back 520,000 ZMK, and make a profit of 400 ZMK (529,000 – 519,600).
Why Trade Forex?
Trading forex allows you to make money in your spare time so you can take control of your financial future. There are many advantages to choosing to trade currencies over other securities such as stocks and bonds. They include the following:
You can trade at any time of day or night, five days a week. Since forex trading is not centralized in a single physical exchange with fixed operating hours, the forex market is essentially open 24 hours. Thus, you can trade whenever you are free, such as after work.
Since trading forex is conducted over the Internet, you can easily trade as long as you can go online. You may even have the option to trade on mobile devices such as tablets and even smartphones, so that you can make trades anywhere there is Wi-Fi that you can use.
There are low trading costs. Generally, most forex brokers do not charge a commission or other fees such as exchange fees. Instead, they make their money from spreads, the difference between the buying and selling price when you conduct a trade, which can be as little as 0.07% per trade although it is usually around 0.1 percent.
You can trade as much or as little as you want. Unlike other securities where you can only trade standard-sized contracts, forex trading allows you to determine the position size you want to trade. Thus, you can trade with a just a small amount in your trading capital.
Unfortunately, with only a small amount of trading capital, your profit is limited, as shown in the example above. However, there is a way for you to be able to make larger trades even with just a small deposit in your trading account – by availing of leverage.
Forex Brokers and Leverage
Leverage is borrowed money extended to you by your forex broker that greatly increases your trading power. How does it work? Let’s say that your broker gives leverage of 1:50, which means that for every 1 unit of currency in your trading account, you can trade up to 50 of that currency.
For example, let’s take the trade you made above. If you use 50-to-1 leverage, you can now buy $5,000 with the same amount of money (519,600 ZMK) in your trading account. Thus, your potential profit becomes 20,000 ZMK if you make a successful trade.
Forex brokers provide leverage to their clients because they want to encourage them to make more trades. Remember that they make money based on how many times you trade. In addition, the risk for them is relatively low since they can get their money back even if you make a losing trade, since any losses are taken from your trading capital.
Forex Brokers in Zambia
If you are interested in trading forex, you need to sign up with a broker. A broker will not only provide you leverage, but also execute your orders. They effectively act as a middleman, finding buyers and sellers whenever you want to trade.
In addition, they will provide you with a trading platform, which is software that allows you to interact with the broker. You can make your orders on the platform, have access to real time price data, as well as be provided with a range of useful tools that will allow you to identify trading opportunities, such as charting applications. Although you generally need to download trading platforms, some brokers also allow you to trade using a browser-based platform, meaning that you can trade using any computer, and even on mobile devices such as smartphones.
Unfortunately, at present there are no reliable brokers based in Zambia. However, there are many overseas brokers that accept traders from Zambia. It is very easy to sign up for an account with these brokers, and once you have signed up, you can immediately fund your account so that you can start trading.
Many of these brokers also give you the option to avail of a demo account that allows you to practice trading by making paper trades that don’t use real money, so that you can learn without losing money. Once you have learned trading and are ready, you can easily start making real-money trades.
It is very easy for you to deposit money into your account using a variety of methods. The most convenient is to use a payment solution such as Skrill, Cash U and Neteller. You can also use bank transfers to deposit money, which will allow you to make larger deposits.
After looking over the list of some of the biggest forex brokers in the world, we have identified the following as being those that are most friendly to Zambians and will provide them with the best trading experience.
Top Forex Broker for Zambia: AvaTrade
They offer high leverage, low minimum deposit requirements, and provide mobile trading, in addition to having a very advanced but still user-friendly trading platform. Most importantly, they make it easy for you to start trading and develop your skills by providing you with a range of educational resources, in addition to allowing you to sign up for a demo account.