Forex Trading in Zimbabwe – The Basics
Here are the basics you need to know in relation to Forex trading in Zimbabwe.
The economic upheavals happening in Zimbabwe should not dishearten the people. More than ever, unity among the citizens and support from the international community are important.
The currency went through a lot of demonetizing phases since the 1980s, so much so that by 2009, the government has decided to suspend it indefinitely. In the meantime, a multiple currency framework was put in place.
Currently, acceptable currencies for buying and trading in the country include the US Dollar, South African Rand, Indian Rupee, Japanese Yen, Euro, British Sterling Pound, Chinese Yuan, Botswana Pula, and the Australian Dollar.
For people holding these currencies, know that there are opportunities to make use of the money that you have to improve your situation and increase your current earnings. Look into international Forex trading opportunities.
We have partnered with some of the best brokers in the industry to make sure that your money is protected and gives you huge profits in return. For those who are trying Forex trading for the first time, here are the basics.
Understanding the Exchange Rate System
Currency values fluctuate due to economic factors. In the Zimbabwean case, hyperinflations devalued their money several times, and every time it was devalued, it became weaker and weaker in comparison to values of other currencies.
Since the Zimbabwean Dollar has already been temporarily suspended and other currencies are in use, what you can do is check the value of the particular money you have on hand and check its exchange rate with the US Dollar (USD), the most-traded currency in the world.
Suppose that you have Euros in your possession. At the current exchange rate between the USD and the Euro, 1 Euro is equivalent to the value of 1.12 USD. This means that 10000 Euros is equal to 11200 USD. Since it is normal for currencies to fluctuate on a daily basis, this exchange rate frequently changes. There’s hardly a day when the rate between two currencies does not change.
How Can You Earn?
Earnings are dependent on fluctuations, and basically, it is similar to profit one can get from buying a product and selling it for a higher price. If you bought 11200 USD using your 10000 Euros, you naturally wish that the dollars in your hand will increase in value over a period of time – that is, having a value that is greater than 11200 USD.
Fluctuations are not huge movements. The changes are so small that you may earn only 10 – 20 USD on a single trading day. The higher the amount of money you trade, the higher is the likelihood for greater earnings. Now don’t forget the negative fluctuations in which you can lose money instead of gain profit.
But I don’t have that big money now!
With the current situation in Zimbabwe, no one’s expecting you to put in that kind of money. Still, you can trade amounts amounting to tens of thousands of dollars. If you have at least $100 to deposit to your Forex trading account, you can trade that kind of amount. How? Your broker will offer you “leverage” – a system through which clients are allowed to trade bigger amounts.
If your broker has a 1:200 leverage, you deposit 100 USD and they will allow you to trade up to 20000 USD. If the leverage is 1:300, you can trade up to 30000 USD on a $100 deposit. And so on…
Your broker will check results gained after one or two days of trading. The standard gain (or loss) for the USD-Euro pair is 100 pips or simply $100 or $100 Euros. If he thinks that he will be losing much for the trade, he will automatically close it. As far as he will not lose “one hundred” he is on safe ground. But, to be repetitious, market movements do not win always win that much or lose that much on a 10000 amount to trade over a short period of time.
For profit calculation, assuming that the currency you bought gained over the currency you originally had, you just have to do some subtraction. If, for example, over a six-month period, the ratio of 1:1.12 changed to 1:1, that means USD currency gained .12 points against the Euro. Since you have in your possession 11200 USD, you can exchange the amount to 11200 Euros in the current exchange ratio. Notice that your original 10000 Euros is now 11200 Euros, an increase of 1200 Euros.
You may ask how much does the broker earn from this specific transaction. Before a trading day starts, the broker already knows the “spread’’ of the USD-Euro pair. The spread is the difference between the buy and sell prices between the two currencies. These differences are very small. Nonetheless, spreads are very important because these are the fees brokers charge to their clients for the service they render. Spreads tend to be small due to stiff competition among brokers. The smaller the spread they offer, the more they can attract potential clients.
Spreads also use the unit of pip. On a $100 gain, the number of pips gained is also 100. In actuality, because of the spread, say a spread of 3 pips, the actual money gained from the trade is 103 USD. One hundred goes to the trader; the rest goes to the broker. That’s how the system works.
If by chance, you have a lot of money to deposit and trade, your chances of earning more are greater and the chances of the trader getting a bigger share are also greater.
Forex Brokers in Zimbabwe
It is not soon that we will be seeing an economic recovery for Zimbabwe, and therefore, brokers there might be hesitant to do volatile investments like Forex trading. Your easy recourse is to find reliable brokers from abroad. There are many that we can recommend. Look for names below.
Top Forex Broker for Zimbabwe: AvaTrade
These companies have been in business for quite a long time. They offer attractive leverages, have good payment systems, and give sufficient educational support for beginners. If there’s any place where you should start, start with one of these companies. It’s where your money will be safest.