Overview – Zimbabwe has a reputation for the considerable number of upheavals in its economy, however, this factor should not deter Zimbabwean traders from starting their trading journey in the forex market.
The Zimbabwean currency has experienced a lot of demonetising phases which started during the 1980s until the currency was finally suspended indefinitely in 2009. Since this occurrence, there were conceited efforts to implement a multiple currency framework in the country.
Zimbabwean traders can buy, sell, and trade some of the following currencies in Zimbabwe:
- US Dollar
- South African Rand
- Indian Rupee
- Japanese Yen
- Euro, and numerous others.
One of the driving forces behind the values of currency and that of hyperinflations, prevalent in Zimbabwe, were the causes behind the devaluation of the numerous times that the Zimbabwean currency was devaluated.
Each time that it went through this process, it became weaker against the value of other currencies, which resulted in its ultimate discontinuation. One of the best things that Zimbabwean traders can do in the current situation is to take the currency that they have on hand, and weigh it against some other popular, and stronger, currencies, such as the US Dollar.
Zimbabwean traders who want to start trading forex must bear in mind that there are still several ways in which they can trade, starting by choosing a broker that offers higher levels of leverage than most, allowing them to open larger positions despite their initial deposit.
However, it is imperative that traders ensure that they understand the risk that comes with higher levels of leverage.
What is forex trading?
The Foreign Exchange Market, more commonly known as the forex market, is the largest, most liquid market in the world due to the daily trading volumes that it experiences. Forex trading can simply be defined as the exchange of one currency for another.
Before Zimbabwean traders start trading forex, it is crucial that they understand what forex trading is, and what key terms they can expect while they start trading in forex. These include, but is not limited to:
- Currency pair, or forex pair – a forex pair consists of two currencies. The first in the pair is the base currency and the second is the quote currency. The base currency is the one being sold, and the quoted currency is the one being bought.
- Exchange rate – this is the price of the base currency which is expressed in terms of the quoted currency.
- Bid/Ask price – the bid price is what the buyer is willing to pay whereas the ask price is the price at which the seller is willing to sell their currency.
- Spread – is the transaction cost for the trade, indicated in pips.
- Pip – represent the smallest increment that an exchange rate can move either up or down.
- Going long/short – going long means buying while going short means selling.
- Leverage – allows traders to open larger positions despite their initial capital.
- Margin – is a percentage that the broker allocates as collateral for leveraged trades.
- Lot size – also known as the position size that the trader takes on the market. This will determine the size of the profits or losses of the trader.
How can Zimbabwean traders start trading forex?
Once traders have familiarized themselves with common forex terms and they have gone through other educational materials and resources to gain more insight into trading, they can start exploring forex brokers to choose one that will suit their trading needs and objectives.
However, before this can happen, it is crucial that Zimbabwean traders realize what their trading objectives are along with their budgetary limitations, the time that they can dedicate to trading, their risk profile and tolerance, and management.
This can be done by formulating a trading plan. It is implemented to help the trader in remaining focused on the objectives that they have set. A trading plan also helps the trader build and maintain discipline, preventing them from trading chaotic, or letting their emotions direct their trading decisions.
A trading plan also helps traders trade in a consistent, systematic manner. It also helps traders improve and refine their trading strategy.
Once the trader has their plan in place, they will know what they need to look for when viewing and evaluating forex brokers. Although the choice in broker will depend on the trader’s needs and objectives, there are some standard factors that traders must keep in mind while choosing a broker:
- Licensing and regulation – the broker must be regulated and show compliance with the requirements which are set by their regulatory entity. This ensures the security of client funds and it also ensures that the broker offers compensation should they be unable to fulfil their financial obligations.
- Trading and non-trading fees – traders must ensure that the fees they are subjected to falls within their budgetary framework.
- Range of markets – this refers to the range of financial instruments that the broker offers. Traders need to look at the number of forex pairs offered between major, minor, cross, and exotic forex pairs. A greater variety offers traders with more flexibility and trading opportunities.
- Trading platform – this is the software through which trades will be executed. Traders need to look at what is offered and how it will help the trader reach their objectives.
- Education and research – traders must consider the educational materials, tools, and resources at their disposal to help them grow. In addition, to refine and hone their trading skills, traders must consider the research tools and resources at their disposal, both from the broker and the trading platform.
- Deposits and withdrawals – traders must have access to reliable payment methods through which deposits and withdrawals can be made with ease. Regulated brokers are also not allowed to prohibit traders from withdrawing their funds.
- The quality, response time, and availability of customer support.
Register a demo account and start trading
Once traders have selected a forex broker, they can register a demo account to start practising trading in a risk-free environment with virtual funds. This is highly recommended for beginners before they register a live trading account and start using their own capital.
Once beginners are more confident and familiar with trading, they can register an entry-level account to ease them into a live trading environment.