If it was profitable to trade (forex, options, indices and cryptocurrencies), why can’t banks hire super professionals and make billions and help out people and make Africa better?
To be able to answer this question correctly, we need to understand the following:
- What forex trading is.
- How Forex brokers make money
- why the 95% of forex traders make losses and only the 5% succeed.
Is forex trading real or a scam in Africa?
No, forex trading in Africa is not a scam. But we must distinguish here for the sake of a proper explanation:
Forex is just a financial market, as in the foreign exchange of currency. For very good reasons, it operates decentralized, but as a result of the recent catch-up of regulators to add more clarity to the market (such as the FX code of conduct). It’s not a hoax or scam, of course not but it needs to be changed.
When most individuals speak about the Forex being a scam, they talk about retail forex. However even here it definitely isn’t a scam, BUT:
The financial markets are seen as a casino or betting platform by many individuals. Retail Forex has the lowest barrier to entry, which should be a positive thing, but for all the wrong reasons it appears to attract people who want to get wealthy very easily, turning tiny amounts of money into big sums and so on.
All these people who are drawn by it and the ads surrounding it attracts shady businessmen to run scam brokers and it definitely scares off more serious individuals. A result of that is the big gap between winners and losers. In the retail FX scene, the advertisement by Certain firms is beyond belief: fast cars, half-naked women, huge stacks of bank notes, 1000:1 leverage… Compare that to a stock broker’s website and it’s no wonder that people talk about a Forex scam.
Is forex trading profitable in Africa?
Forex Trading is HIGHLY profitable in Africa. The currencies of various countries are exchanged by people from every corner of the world.
Get the following and you can be profitable in forex trading.
-Effective education for forex trading
-Right trading mindset(forex doesn’t get rich fast scheme and a very serious business capability.)
-A strong trading strategy to help you find opportunities for trading in various forex markets.
-To follow the laws of the trading system, self discipline.
-Try and carry out the following scenario after obtaining the above and your profitability is forever assured.
Just little increase on Captial on monthly basis will do alot.
You have Capital Under Management : $10k
Your Risk per trade : 5% of Captial Under Management
Your Reward per Trade : 4x 5% of capital Under Mgt
Trade Quantity : 10 per month
Win rate : 40% of your trades becomes a winner
Now let’s work out:
40% winrate means you win 4 trades and lose on 6 trades. Since each winner is 4x, the 4 trades gives a profit of 4 x 4 x 5% = 80% gain. The 6 loses will be 6 x 5% = – 30% Loss
If you add your revenue and loss, you will get 80% – 30% = +50%, since your capital under management is $10k and you made a profit of 50%, it means you made $5k profit i.e your account has increased to $15k within a month.
If you stick to 10 trades per month, You can calculate yourself what you could get if you change the Captial under management, risk per trade, reward per trade and the win rate.
So if Forex trading is real and profitable, why are banks not hiring or employing the best Forex traders out there in Africa?
First of all, big banks do have professional employee traders to do exactly what you’re saying. Each day the Forex Market alone trades over $5.3 trillion US dollars. Don’t you think that’s all individual traders, don’t you? An infinitesimal fraction of that total represents individual traders. In fact, Forex trading for speculation began when large companies such as General Electric realized that their currency operations made more profit, simply meant to hedge against future obligations, than from many of their real revenue divisions. So they had internal trading desks opened.
That said, money is lost by most individual traders. That’s not because trading is a scam, it’s because it is approached from the wrong angle by the losing traders. Some seek unreasonable gains. I saw some wanting to make a hundred percent a month. Every week, some want that. Now it isn’t difficult to make 100 percent gains on a $500 account. All it takes is a bit of luck to ignore risk control completely. With 50 percent odds in your favor, you could also accomplish those gains via a coin toss. But will you be able to repeat it again and again? Not obviously. In return for the possibility of 100 percent gains, you’re always exposing yourself to 100 percent losses. So the first step towards a successful trading career is to be reasonable in your expectations.
Proper control of risks, already suggested, is key. On each trade, risk just a tiny fraction of your account, while leaving your upside open. Risk a dollar, make $5 for the winning trade, even $10. With one winning trade, you can lose the dollar a couple of times, and still make it back, and more. Repeat then.
It’s not difficult to make decent gains on a reasonably small account. Doing the same on a billion dollar or larger account is not as easy. You’re probably moving the market by just placing a trade at those levels. Getting the same thing out of the trade. Warren Buffett complains that he just can no longer find decent possibilities. About why? Because he needs opportunities to absorb billions of dollars at a time on the market. In the thousands, I trade. I’m looking for tons of opportunities.
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