Is Online Forex Trading A Gamble Or Business?
With online forex trading, one can reaphuge profits in a few seconds but one can also lose it all in a flash. Taddewo Senyonyi finds out how and why.
Traditionally, for one to buy or sell foreign currencies, they had to go through a broker.
The broker/trader dealing in foreign currency required in-depth knowledge of the industry, constantly updated information and a large amount of liquid cash as an initial investment before breaking into this highly lucrative industry.
However, with the advance of the Internet, Online Forex Trading has come to the fore, eliminating the need for a broker.
The availability of online platforms and automated Forex trading systems has opened up this investment medium to everyday people in a way that it never has been before.
The biggest barrier to success in foreign exchange trade therefore is no longer start-up costs or lack of information, but fear of the unknown.
“One can open up an account with $100 only,” Mr. Ezra Musinguzi, a Forex trader and manager of over 1,000 online accounts said.
Although individuals can run an Automated Online Account directly, Musinguzi says Managed Forex Accounts in a country like Uganda would be the best option.
“Online Forex trade is not a business of gambling,” he quips. “You must have the knowledge, skill and experience of the business. You can make huge profits but you can also make huge losses unlike in traditional Forex trading,” Musinguzi said, adding that investors should open online accounts themselves and get managers other than giving out the money to middlemen to trade for them.
The manager earns an agreeable commission with the client upon making profits, he explains.
He advises investors to look out for reputable brokers, with good history, clear principles and execution.
More and more people are joining this trade. Despite several advantages of this development, concerns have been raised regarding regulation of the industry.
Particularly, many licensed licensed Forex Bureaus are already engaged in online trade but the money made out of this platform is not reported to Bank of Uganda.
“The Central Bank cannot regulate online Forex because it does not have a physical location,” argues Musinguzi.
However, Bank of Uganda’s Director of Research, Dr. Adam Mugume says licensed Forex bureaus who do not disclose their online deals risk losing licenses once convicted.
“Forex bureaus must report weekly, monthly, quarterly their transactions whether physical or electronic and that’s what non-banking department does. If it is done (online trading) and you do not report, it’s a crime and amounts to cancelling out your license,” he said in an interview with Opportunity Magazine.
It is estimated that over 4 trillion USD in currency is traded everyday and considering that sort of scale, definitely there’s much money to make in this market.
However, as Musinguzi puts it, one needs to commit individual effort to learning and obtaining as much information as possible to make an informed decision.
With this done, online trading will be a business other than a gamble.
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Updated on 2013-05-09 09:25
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