Why Forex Trading Is Risky For Most People.

Retail Forex trading has attracted a lot of interest and growing in popularity in SA in recent years. An estimated number of 190,000 retail Forex traders are present in an active SA currency trading. This number is expected to increase in the coming years.

According to the Bank for International Settlements (BIS) 's latest report, the South African rand (ZAR) was ranked the 18th most traded currency in the world in April 2019 accounting for 1.1% of the average daily turnover of the Forex exchange market the daily volume of $ 6.6 billion recorded in April 2019.

This figure is comparable with other developing countries such as India (1.7%), Russia (1.1%) and Brazil (1.1%).

Demand for retail FX increase in SA

Technological advances such as improved penetration of the internet, online trading process automation and lowered transaction costs have really helped in popularizing participation of the retail Forex world.

Just as the Forex trading market SA, which increased the daily trading volume to $ 19.1bn in 2017. The Retail FX trading in SA has benefited a lot from a strong sector of local finance, local Forex and Contracts for Difference (CFDs) regulation by the Financial sector behavior Authority (FSCA).

In addition, regulations were tightened recently in Europe about leverage and marketing of products Forex and CFD broker has made Europe look outside Europe. And Asia, Africa, and the Middle East has become an attractive growth market for the broker.

Because the retail Forex market SA is set up, many brokers who choose to get set up with the FSCA and has opened a regional office here. SA retail FX trading has benefited from a strong sector of local finance, local Forex and CFD regulation by the Financial Sector Conduct Authority (FSCA).

SA strong business relationship with the global economy, the financial sector is well managed locally, and a growing interest among the locals for online trading in FX and cryptocurrencies has made SA, an industry leader and hub for FX and FX trading broker on the African continent.

In fact, the financial sector SA has benefited from this growth, also has its risks. Forex Broker SA trying to understand how the industry works and the risks of FX trading and closed what investors in this space should know.

What is Forex trading?

Forex trading, also called currency trading is the trading of currencies. Unlike stocks, where a trade based on the value of the underlying instrument single in Forex trading, currencies are traded against each other, in pairs.

In simple words, you buy a currency you believe will appreciate or increase in value.

For example, take the ZAR / USD as a currency pair. Here, the ZAR is the base currency, while the USD is the quote currency. the base currency is how much of the quote currency needed to get one unit of the base currency.

Suppose you expect ZAR to appreciate in the near future, then you buy the ZAR / USD, which means you buy and sell USD ZAR simultaneously.

As expected, if the ZAR has been rewarded in the past against the USD, you will close the position by selling the ZAR / USD, which means selling and buying back USD ZAR profit in the process.

How can you get started?

SA has an independent regulatory body, FSCA, which oversees the market behavior of financial institutions in SA. You can choose FSCA regulated Forex broker South Africa's FX and CFD trading.

It is important to choose a well-known broker trading. While choosing a broker, we must be sure to choose a broker who is licensed and regulated under such regulations FSCA level 1 or FCA (UK) or ASIC.

Also, look for the trading platforms such as MT4, MT5, Automated trading etc. If the broker provides these platforms then you should work with him.

Compliance with regulations in jurisdictions allowing brokers to operate with transparency and accountability and protect the interests of investors.

This will ensure complaints compensation is in accordance with state law and restrict the opportunity to get scammed. Regulations ensure security in place for the money stored in the platform broker, and the broker is responsible for moving money without your consent.

Why do most traders lose?

This is an important fact in the FX industry that investors should be aware of.

The Forex market is very volatile. And for retailers, foreign exchange fluctuations can be overwhelming and can remove their portfolio in a matter of seconds.

As fluctuations are driven by various global events, keeping track of everything all the time is almost impossible.

Retail traders simply lack the resources and access to information has a global financial institution; to protect themselves most of the time.

Also, the leverage offered by the retail FX brokers often ends up causing pain. Let us say, traders using 100x leverage offered, simply by making a small deposit, say 1000 rand (ZAR), retail investors can take positions 100,000 rands (100 X 1000 rand).

A measure of such a position, the gains may come quickly, but step Pip some fight you can delete your entire trading account and eventually if you do not know what you're doing.

Finally, research in psychology and human behavior have shown that humans are not suitable for trading, and they are programmed to fail because of biased behavior.

Much such bias Bandwagon effect, herding, information bias, overconfidence and so work against human trafficking because it is very important to develop the discipline in trading.

But you can make money with Forex trading?

For retail traders, Forex is risky and the odds are stacked against them. It is essential that prospective traders do not invest money or invest only the amount they can afford to lose. But there are some who make money consistently from Forex.

As always, the experience is the best teacher. To be good at trading, it is important to cultivate the discipline and apply the principles of effective risk management. Remember, you have to stay in the game longer to have a chance to win it.

Knowledge is an important first step in becoming a good trader. Invest time in educational resources that some brokers offer. Learned along the way.

Do not take leverage until you are clear about the various drivers of price movements. Understand that the market could be against you at any time without your knowledge and protect yourself at all costs.

Be prepared to lose, make sure small losses and win big every time you win.

Develop your own strategy and stick to it. Keep repair from time to time by making small changes and adapt.

Best Of Luck!