Forex trading: The good and the bad

Kuda Manzanga
I HAVE been trading stocks, forex, futures, options and warrants since I was 19 years old. This brings my cumulative experience in the industry to over 12 years. There is so much talk about FOREX dealing in the market and I have thought of sharing my views on the good and the bad side of the industry.

Every country has its own money referred to as “currency”. In order to facilitate trade between countries, money needs to exchange hands. The challenge is how do you determine what value one country’s currency is compared to the other. This is where the forex market comes into play. In 1973 the Bretton Woods Accords was drafted, which had linked or pegged the value of the US dollar to the value of gold.

This opened up the world to the free floating monetary exchange system, which means that the value of one country’s currency in relation to another is to be determined “freely” by the markets based on forces of demand and supply. Each day, $7 trillion dollars’ worth of currencies are exchanged. This is more money than the cash that exists in the world. It is true, you cannot print enough physical money to match the money that is in circulation electronically. In the past, the forex market was the preserve of the rich and wealthy. Today, because of technology anyone can trade in forex through what are known as brokers. Just like you cannot walk into Econet and ask to buy their shares, you cannot just trade forex simply because you want to. You would need to trade with a broker who gives you access to the forex market. So where do things go wrong?

Here is the BAD side of forex — commissions. Brokers make money through commissions only if you and I trade. To ensure you trade, they form partnerships with “marketable individuals” who post their often fake lavish lifestyles on social media. This grips the attention of the unsuspecting individual and entices them to trade. The marketers are paid a commission for every trade the unsuspecting individual makes and you can imagine if you have 10 000 individuals trading that you have introduced to the broker how much money you can make. This is known in the industry as “introducing broker fees” and the marketable individual is known as the “introducing broker”. There is nothing amiss about introducing broker fees as “referral fees” already exist in other sectors like the service industry. However, in forex it’s on steroids and has resulted in the rise of introducing brokers advertising seminars and attempting to get as many people to be present so that they can generate the fees.

The Lesson: Do not attend such seminars. Forex trading is genuine but don’t be lured into these two-day courses because their intention is to not teach you but to make money off you.

Signal Sellers
A signal is an instruction that you are given by someone to enter a trade and the promise is that having entered this trade you will make money. Imagine you were an introducing broker and you wanted to generate your fees quickly and en masse. How would you do it?

STEP 1: you would make sure your social media presence is strong and attractive
STEP 2: having positioned yourself as a guru to all unsuspecting individuals, you would then sell them signals.
STEP 3: now you have 10 000 individuals all trading at the same time based on the signal you have sold them allowing you to generate commissions from their trades.

The Lesson: Learn how to trade on your own. Do not rely on other people selling you signals or giving them to you for free. Always ask yourself the simple question. If the signal is so good why would someone give it to you? Why don’t they use it themselves?

Scammers
There will always be people out to take your money if you are not properly educated. In forex trading, there are people who take your money promising you fantastic returns. Do not under any circumstances give your hard earned money to anyone. No one can guarantee a return and if they could why would they need your money. Why don’t they do it themselves?

The Lesson: Do not give anyone your money to trade on your behalf. The above are the top three things I believe are BAD about forex trading. There are however numerous positives.

The business is legitimate. Some people have been trading for over 25 years and generate handsome returns from forex. Remember, this may be new to us as Zimbabweans but it’s been around for over four decades. Zimbabweans are uniquely positioned to learn and profit from trading forex online. This is why with dollarisation of the economy the average Zimbabweans had a basic understanding of foreign currencies and exchange rates. We have high literacy and internet penetration rates. We have used the most powerful currency for over eight years and in that time have seen its effect on trade depending on its strength or weakness at that time. All these things are what make the average Zimbabwean better poised to learn and trade forex profitably.

If taken seriously forex trading can become one of the largest foreign currency earners for the nation. Anyone trading forex successfully can generate over $500/month. This means that they are gainfully self-employed. This is especially good for the youth. There are good forex trading schools that are dedicated to training people properly. One that has someone with a proven track record of trading the markets successfully, one that does not push you to trade with a particular broker, one that is registered, one that does not offer to trade on your behalf or sell you signal, one with a clearly defined curriculum.

This is why we have set up a Forex Trading School in Bulawayo where we are located at the Theological College of Zimbabwe. The new facility is dedicated to teaching and mentoring people and our website is http://ift.tt/2uzuEW0.

We are also a member of the Forex Traders’ Association of Zimbabwe and can be contacted on 0778708331 landline :08677006011. Our institution has run an extensive campaign educating people on how to identify scammers.

In conclusion, I would say that there is nothing new about the forex markets. There are individuals making over $1 million a month trading the forex market. It is a viable source of income. It only requires training and a methodological approach and most people don’t see success until after they have practised for six months or longer.

It is not a get rich scheme but you can become rich from doing it properly. It is my wish to see more and more people take it up as it is beneficial for both the individual and the nation.

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