If you live in Nigeria and you actively use social media, odds are on that you have probably heard the term ‘Forex’ being used around a lot, from shady people hitting you up promising that they will give you an 100% returns on your investment if you invest in Forex through them to someone on social media bragging about how they made millions off investing in Forex.
Forex is one of those terms that seems to be shrouded in mystery, the average person knows the word Forex but would be hard pressed to come up with a suitable explanation for it or how it works. Overtime an even more pressing question has appeared, Is Forex another word synonymous with scam like MMM? Should I be investing my hard-earned money into Forex? Today, we’d be breaking down for you how exactly Forex works.
First things first, what Is Forex?
Let’s give you a quick analogy on how Forex works, Say you leave Nigeria and go to Dubai for a vacation, when you get to Dubai, you are obviously not going to spend Naira over there as they don’t recognize the currency for spending in Dubai. No, what happens is somewhere along the line, you exchanged your Nigerian Naira for the Dubai Dirham so that you can spend the Dubai currency over there.
Basically, you exchanged one currency for the other, to you the process of exchanging your money was relatively simple, but overall it’s not that simple, there is a global market structure in place that made the exchange simple for you. It is in this marketplace that exchange rates (how much naira makes a dollar) are determined, it is in this marketplace that currencies are being exchanged and traded against each other on a global scale. And the market is called the FOREX market. The word “FOREX” is basically a mix of two words, Foreign Currency + Exchange.
On how Forex trading works, the whole process of trading currencies is an immensely volatile one, like any other commodity, the more a currency is in demand, the higher the value it has, but the world we live in as an highly unpredictable one, there is a myriad of things that can happen in a short span of time and can’t be seen coming that affects the value of a currency, a currency that had high value yesterday might be of little worth the following day, there is a steady and constant stream of information that affects how the market operates.
In truth, Forex traders regularly incur massive losses, losses are inevitable, one person’s win is another person’s loss, only a select number of people ever become really wealthy through trading Forex, there is a lot of technical & mathematical analysis involved in Forex trading, it takes years to become an expert Forex trader and the learning curve is quite steep, taking online course or reading a book on Forex is not going to cut it. It has often been said that only 10% of Forex traders make significant profits to actively fund their personal finances
So in conclusion, while Forex is obviously not a scam in the way that ponzi schemes are, it is a high risk, highly volatile trade environment where anything can happen, the odds are usually stacked against the retail investor, and only few people stick at it long enough to make good money at it, for every seeming success story you see on social media, there are thousands of burn stories in the back-ground of people who lost their money trading Forex.
Is Forex trading something you should consider trying out? Well, if you are not risk averse and you have the patience and fortitude to understand in detail how the market works, build enough expertise and technical knowledge but for the average Nigerian looking for a side-hustle and has a low-risk appetite, well it is not something that we’d advise you to do in the least.
And if someone tells you they can help you invest in the Forex market with the promise of guaranteed returns. Well, we believe you have read enough to be able to make your conclusion.