There’s no doubt that 2020 saw a significant uptick in forex trading activity, particularly in developing economies such as Africa.
For example, some leading brokers in Africa saw demand for forex accounts increase by more than 100% through 2020, while trading in African nations such as Nigeria or South Africa have experienced sustained and substantial activity hikes over the course of the last 18 months.
But why has forex trading become so popular in Africa, and what factors make the marketplace so appealing across a range of different countries in the region?
Increased Liquidity and Africa’s Unbanked Population
Let’s start with the basics; as around 57% of Africa’s population (around 95 million people) is currently unbanked and experiencing a significant lack of financial inclusion across the board.
However, the forex market negates this, with the rise of online trading platforms and welcome bonus offers connecting retail traders to the global financial marketplace and empowering them to create a passive and potentially lucrative stream of income.
The accessibility and appeal of forex is also underpinned by the market’s innate liquidity, which refers to the ease with which so-called “major” currency pairings (which account for around 68% of daily trading activity) can be bought and sold in real-time.
This is highly beneficial for beginners, who can subsequently leverage such liquidity to their advantage and profit from short-term price fluctuations.
The Rise of Part-Time Traders
Today, the forex market sees around $6.6 trillion traded globally every single day, with this volume up from $5.1 trillion in 2016.
Incredibly, this sum was as low as $1.2 trillion in 1995, before the emergence of the digital age and the growth of online trading platforms such as the MetaTrader 4.
This innovation, coupled with the emergence of concepts such as copy trading, means that anyone can start forex trading in 2021, either as a lucrative full-time career or a part-time venture with a view to boosting your earning potential (which is a huge motivation in Africa and similarly developing economies).
Small Capital and Leverage – A Dream Scenario for Investors
Another key element to forex trading and its rising popularity in Africa is the market’s fundamentals, with leverage offering a relevant case in point.
This is expressed as a multiple of your deposit size, with the term ‘margin’ referring to the amount of capital effectively borrowed from a broker. Even reputable brokers can offer leverage of up to 200:1, enabling part-time traders to open and control relatively large positions with a small deposit amount.
Make no mistake; you can execute significant trades with a deposit of just a few hundred dollars, with this appealing to novice but aspirational investors who want to pursue tangible returns.
This has definitely attracted a new generation of traders from the developing world, while this trend is unlikely to change anytime soon.