Editor's note: In this article, Olumide Adesina discusses some of the reasons why investors in Nigeria look to forex trading rather than stock trading.
Nigeria, like many other countries in the world, has experienced a boom in forex trading in recent years. There are several reasons for this. For example, investors want to expand their portfolios because forex is becoming more accessible and easier to understand.
Forex trading is no longer just about money and investment professionals, it is now an investment pie that everyone wants a piece of. Here are some of the reasons why investors look to forex trading:
Unlike many other investment options, forex trading is very budget-friendly. The amount of investment will greatly affect the profit, but even a small investment can be profitable.
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This means that new investors and those who want to jump into forex trading can trade without spending a fortune and taking too much risk.
Choice of currency
Depending on the platform you use, brokers like Exness often have dozens of currencies and currency pairs to choose from. Major currencies such as dollars and pounds are the most popular, but emerging market currencies are also an option.
Some of the liquid market currencies you can invest in include Euros, Canadian Dollars, Swiss Francs, US Dollars, and Japanese Yen. This is another reason why Maltese investors prefer foreign exchange as they often seek opportunities outside the euro.
Multiple trading strategies
Another reason why forex is so popular in Africa’s largest economy is the variety of trading strategies on offer. Unlike stocks where you buy, wait for a profit, and then sell, forex trading gives you more control over your investments.
Scalping is a popular but labor-intensive trading strategy. Forex trading profits are made when the currency you buy becomes stronger than the one you bought. These moves can be very small and scalping takes advantage of this. Scalp traders sell when they see small spikes, but because they sell often, they can make big profits in the long run.
Day trading is exactly what you think it is. In day trading, you open a position in the morning and wait hours or all day to close it. Day trading is harder to do because it is less predictable and often requires more money, but it is still popular. position trading
Position trading is the most popular strategy among average investors. This involves keeping positions open for weeks or months in hopes of greater profits. Given that strong currencies tend to rise, the longer you wait, the bigger your profits are often.
24 hours trading
The main advantage of forex trading is that the market never closes. With something like stocks, you must wait for the bell to ring and the market opens before you can act, but forex never sleeps and you can trade whenever you want.
It is impossible to conquer the market
Many investors are often concerned or outright disgusted by the idea of a few whales controlling a particular investment. Because these whales essentially control the market and therefore can control whether they make or lose money.
But in the world of forex trading, it is almost impossible to be a whale because there is too much liquidity in the system. There may be existences that can affect the price or the market, but this is only for a very short period and the market corrects itself quickly.
Leverage is everything in the world of forex trading and, simply put, leverage is the ability to invest your money 5x, 10x or 20x to increase your potential profit.
If he has $10 in investment capital and the broker allows 10x leverage, he can invest $100 in forex. Considering that the forex profit per trade is often very small if he can grow his investment by 10x, he could get a 10x return. This makes the leverage optimal for those with a small investment budget.
- Olumide Adesina is a Financial Market analyst at Quantum Economics