Forex Trading in Zimbabwe

Like many African countries, Zimbabwe has recently turned its attention towards forex trading. As a result, many young Zimbabweans want to dip their foot in the forex pool.

If you are one of them, you have come to the right place.

In this article, we will go over everything you need to know about Forex trading in Zimbabwe. Hopefully, at the end of this guide, you’ll be familiar with the nuances of forex trading.

So, let’s get started!

Overview

Following an economic crisis caused by the COVID-19 epidemic, Zimbabwe’s economy is expected to recover by 2.9 per cent in 2021, aided by agricultural recovery and base effects.

Zimbabwe’s multiple currency system came to an end in 2019. To avoid the hyperinflation of the past, the country restored its native money with a new system. The Reserve Bank of Zimbabwe implemented a managed float exchange rate regime beginning in 2020.

Zimbabwean retail forex traders now have a renewed opportunity to participate in global financial markets.

The Securities and Exchange Commission of Zimbabwe (SECZ) says relatively little about retail trader regulation, yet Zimbabwean traders can still use many registered brokers.

Getting started

For Zimbabweans wishing to grow their financial portfolios, the foreign FX market can be a great opportunity.

All you have to do is:

• Have an internet-capable device, such as a smartphone, tablet, or PC.
• Choose a regulated forex broker who accepts Zimbabwean clients.
• Visit the broker’s website and look over the available account types. These can range from small-scale accounts with low minimum balances for new traders to accounts with complex features for active traders.
• Complete an application form.
• After filling out the application, you will be given a username and password to access your account.
• Log in to the brokerage’s customer portal.
• Make arrangements for funds to be transferred from your bank to your account. This can be accomplished with a credit or debit card, as well as an electronic transfer from your bank account.

That’s all there is to it. You are now ready to start trading forex. 

What do you need to know as a beginner Zimbabwean trader?

1. Basics

The buying and selling of currency pairs are referred to as forex trading. You are essentially buying one currency while selling another in the hopes of closing the position with a profit.

As a forex trader, you’ll come across a lot of terms; therefore, let’s define some of them:

Pip

The pip is the smallest unit of currency in a currency pair. For most currency pairs, one pip equals 0.0001.

If the GBP/USD rate is 1.4000, the pip is the last decimal value in it. In this scenario, the last value is zero. Thus, one pip is the difference between 1.4000 and 1.4001.

Leverage

Leverage permits you to take positions that are larger than the amount of money in your account. Consider it a multiplier of your profit or loss.

Assume you have $1,000 in your account and a leverage of 100. If you use all of your $1000 to initiate a long position, you open a trade for $1,000*100, or $100,000. If the price falls by 1%, you will lose $1000 (1 % * $100,000) or all of the money in your account, and the price of a currency pair can easily fall by 1%.

Bid/ask price

A bid price is the highest price at which a trader or broker is willing to purchase a currency pair. The ask price denotes the lowest price at which a trader or broker is willing to sell.

Short/long positions

A long position is one in which you bet on the price rising, whereas a short position is one in which you profit on the price falling.

Spread

Forex brokers charge commissions based on the spread, which is the difference between the buying and selling prices.

Forex lot sizes

A lot is the typical unit size of a forex contract. Typically, it is 100,000 units of the base currency. A currency pair’s base currency is the first currency. For example, the EUR is the base currency for EURUSD.

There are three lot sizes in forex:

• Standard Lot – 100,000 units
• Mini Lot – 10,000 units
• Micro Lot – 1,000 units

2. How does the forex market work?

The forex market is the world’s most liquid market, having the highest daily traded volume of any market or exchange. The Foreign Exchange Market is worth more than $5 trillion daily.

Aside from its size, the market is open 24 hours a day, seven days a week! It operates nearly 24 hours a day, seven days a week.

Except for the weekend, the currency market is open 24 hours a day, five days a week.

Currency pairs, such as the Z$/USD, are often traded, and traders take positions based on their price change estimates.

Currency price fluctuations are measured in pips, and traders use pips to determine trading positions.

3. Security

Since anyone with a computer may now trade online, security has become one of the top concerns.

As the forex market has become much more open, you want to make sure that everything goes as planned to trade with confidence. Every trader knows that one of your primary considerations should be security.

Before opening a trading account, make sure to check out the broker’s website. If you see anything fishy, don’t register an account with that broker.

4. Payment options

As a Zimbabwean trader, you have several payment alternatives available to you. Ecocash is a cutting-edge mobile payment service that allows you to conduct financial transactions using your phone.

After Ecocash, TELECASH is the second-largest mobile money platform.

You need to check if the broker allows these payment methods. For example, a lot of South African brokers allow you to trade with domestic payment options.

Forex trading example in Zimbabwe

Consider the Zimbabwean Dollar (Z$) against the US Dollar (USD). One US dollar equals 361.9 Z$. So, if we buy $1,000, we would pay 361.900 Z$. Assume the value of Z$ rises in the market. In that case, we would pay less Z$ for each USD bought. This also implies that for every USD sold, you will receive more Z$ than you were charged. The difference between the Z$ charged and the Z$ earned is your profit.

How to open a forex trading account in Zimbabwe?

You can start an account by deciding on a regulated forex broker and registering with that broker. We’ll discuss Zimbabwe’s forex regulations later.

To begin, you must complete your account and financial sufficiency information. Then, to finish the verification, you must present your two KYC documents, namely ID and address proof.

Brokers with live accounts can be either market makers or DMA (Direct Market Access) brokers, with DMA brokers being either ECN or STP. ECN (Electronic Communications Network brokers) are platforms that allow investors to speak directly with other investors in the forex market, with fees based on the amount exchanged by clients.

STP, or Straight Through Processing, is the procedure through which a broker transmits trades to liquidity providers for execution while still providing access to interbank market structure. While DMA allows you to have wider access to markets with larger rewards and risks, locating authentic brokers who offer DMA is tough and time-consuming.

If you are a novice, you can only use conventional spread accounts if your broker offers STP accounts. However, ECN accounts can be opened by experienced traders. Although the fees are minimal, a commission is paid dependent on the number of trading lots.

Zimbabwean forex regulations

Zimbabwe’s Security and Exchange Commission primarily regulates the Zimbabwean forex market through the Reserve Bank of Zimbabwe.

Under the Exchange Control Act, the RBZ established the rules for currency exchange in Zimbabwe. The financial authorities declare clearly that no one shall deal (buy and sell) foreign currencies other than from an authorised dealer. Ordinary citizens can only exchange money at licensed institutions and commercial banks.

Given Zimbabwe’s turbulent political and economic situation, the Reserve Bank of Zimbabwe has issued a strong warning against illegal foreign currency hoarding.

How much capital do you need to start trading in Zimbabwe?

Many brokers offer a multitude of options for opening accounts. However, both of these accounts demand a minimum account balance.

Many brokers have a $5 minimum. However, we recommend starting a trading account with a $500 minimum. This ensures that a substantial position may be taken in trading, and a reasonable profit can be achieved on market fluctuations.

One thing to keep in mind is that a position is determined by the balance kept and the leverage offered by the broker. Therefore, if you are a day trader, you should not risk more than one per cent of your forex account on a single trade. In other words, if you have $1000 in your account, you should not risk more than $10 per trade.

The lot size is chosen also has an impact on trading positions. You can trade in Standard lots, Mini lots, or Micro lots, as previously stated (1000 units).

The pip per lot value is set if USD is listed as a quote currency in a pair, such as EUR/USD or GBP/USD, and your account is financed with USD. As a result, one pip is worth $0.1, $1, and $10 for a Micro, Mini, and Standard lot, respectively. Knowing these specifics is quite useful because it aids in determining the level of risk that you can tolerate and when to enter the trade.

Assume you have $500 in our account and want to trade on small lots for EUR/USD, currently trading at 1.2000. For the EUR/USD pair, the broker offers leverage of 100:1 and a spread of 0.4 pips. You can buy one mini lot of EUR/USD for $120 (1 mini lot = 10,000 units x $1.2000 = $12000 / 100 leverage = $120).

Let’s say you have $500 in your account, you open a position of 40000 units, or four Mini lots, in the EUR/USD pair, for a total capital investment of $480. A one-pip increase in EUR/USD would result in a $1 gain per lot. As a result, our total gain on our stake would be $4.

Starting with a small amount, such as $500, provides you with the freedom to trade, as trading with very little cash and excessive leverage is quite dangerous.

Most liquid currency pairings, such as EUR/USD or GBP/USD, move in the 100-pip range. As a result, if you invest intelligently and with moderate leverage, you can get a good return. However, before taking the leap, you should always consider your risk tolerance.

Best forex trading platforms for Zimbabwean traders

The best forex trading platforms for Zimbabwean traders are those offered by forex brokers. The MT4 platform is the most popular, and most forex brokers provide it. Some forex brokers also offer the MetaTrader 5 and cTrader platforms. Either you can use them on your desktop, or you can access them through mobile apps.

What is the best time to trade forex as Zimbabwean?

The optimum time to trade forex in Zimbabwe is between 9 a.m. and 3 p.m. This is because the London and New York trading sessions overlap and are active. Volatility is at its greatest during these trading hours.

While you can trade at any time, you shouldn’t try to be a night owl, as it can affect your trading.

The best time for trading forex in Zimbabwe according to four major forex sessions is:

• 9 p.m. – Sydney session
• 3 a.m. – Tokyo session
• 9 a.m. – London session
• 1 p.m. – New York Session

You can benefit from the most liquid and volatile sessions if you can get up during the overlapping of Tokyo and London or London and New York trading sessions.

Is forex trading legal in Zimbabwe?

Forex trading is legal in Zimbabwe and governed by the country’s financial regulator, the Securities and Exchange Commission of Zimbabwe, through the Reserve Bank of Zimbabwe.

Brokers providing services in Zimbabwe are required by law to be regulated by the SECZ, which protects investors from fraudulent schemes and misconduct.

The brokers offering FX trading and CFDs must be registered with the SECZ and have a local office in Zimbabwe for local citizens to trade in a secure environment.

Forex trading strategies for Zimbabwean traders

After you’ve done all of the above steps, you’ll have a funded online brokerage account from which you can trade forex from Zimbabwe. First, you need to create a trading strategy that fits a successful trading approach to improve your chances of success.

Several strategies are listed below that have shown to provide great outcomes for successful retail forex traders, depending on your level of experience and education in the market. Forex traders trading from Zimbabwe or anyplace else in the world can apply the strategies mentioned below.

News trading

As the name suggests, news trading could be for you if you want to keep up with economic and geopolitical headlines. Earnings reports, changes in interest rates, and inflationary pressures can substantially impact the markets. As a result, traders can greatly benefit from trading on news releases and dramatically boost their trading strategy by including economic announcements into their purely technical and charting approach.

Scalping

Scalp forex trading involves executing many fast currency trades in a short timeframe to generate a series of tiny profits.

This means that scalp traders must always be completely focused on the chart and ready to react to price swings promptly. If a scalp trader is not concentrated in this manner, he or she may lose out on potentially profitable setups.

Day trading

Forex day trading is a short-term trading method that involves buying and selling currency pairs on the same trading day. Rather than keeping overnight positions, traders will typically place several forex trades per day and close them out at the end of the trading day.

Swing trading

Swing trading is mostly concerned with trading in the medium term. In this strategy, you trade the main price movements of the forex pair, such as short or medium-term trends.

Swing trading necessitates keeping your positions open overnight for a few days to a week or two.

Trend trading

Trend trading includes having a long-term view of a currency pair’s directional moves. The method comprises identifying patterns known as trends and then establishing currency positions that correspond to the trend.

FAQ

Is forex trading illegal in Zimbabwe?

No, trading forex is completely legal in Zimbabwe. However, there have been a few brokers working illegally in Zimbabwe or non-Zimbabwean brokers swindling Zimbabwean traders.

How do you get started with forex trading in Zimbabwe?

You may begin trading forex in Zimbabwe by locating a broker who meets your trading requirements, opening an account, and making a deposit. However, before operating a live trading account, you should practice on a demo account.

How much capital do I need to begin trading forex?

Some forex brokers will let you start trading with as little as $1. Others require you to start with $100 or $1000.

Which African countries are known for forex trading?

• South Africa
• Kenya
• Zimbabwe
• Tanzania
• Swaziland
• Rwanda
• Namibia
• Nigeria

Pros of forex trading in Zimbabwe

• The forex market is available 24 hours a day, five days a week, so forex trading can fit into traders’ schedules more easily than other types of trading.
• The FX market is the most liquid in the world, which means that there are always many buyers and sellers eager to make a trade. Individuals, businesses, and institutions convert about $5 trillion in money every day, with the vast majority of this activity aimed at profit.
• One of the pros of forex trading is the ability to buy or sell currency pairs depending on the status of the market.
• Because of the huge volume of currency exchanges each day, which amounts to billions of dollars every minute, the price swings of some currencies are particularly volatile. Thus, speculating on price changes in either direction has the potential to yield huge rewards.
• Technical analysis works well in the forex market. While equity and bond traders may need to delve deeply into share and bond issuers’ fundamentals and financial health to ensure their assets will return profits, FX traders can frequently earn through technical analysis of price charts.
• Private information held by insiders and major stakeholders of those assets can often significantly impact the stock, bond, and even commodities markets. On the other hand, the currency market is significantly less centralised and less impacted by insider knowledge.

Cons of forex trading in Zimbabwe

• The global forex market trades more than $5 trillion each day, with the vast majority of transactions conducted by significant players such as banks, hedge funds, and other huge financial institutions. Because of their trading volume and better access to information and technology, these players have a natural edge when fixing pricing and influencing market price fluctuations.
• The forex market is an over-the-counter market, which means that trades are not executed on a centralised exchange and that regulatory monitoring is sometimes limited. As a result, traders may need to conduct a due diligence study on their broker’s reputation and trading habits before signing up for a trading account.

Bottom line

If you are a newbie, you should dedicate as much time as possible to mastering the essentials of forex trading.

We recommend trading on a demo account. In this way, you’ll get to know what it feels like to trade the forex market.

Open a real account once you’ve mastered the demo account. Begin with a tiny amount, such as $500, and trade with the smallest lot size.

Don’t bite more than you can chew. A decent risk management method is to never risk more than 1% or 2% of your trading account.

If you are a beginner Zimbabwean trader looking to get started in the forex market, this tutorial can be extremely beneficial. If you don’t understand something, reread the guide; you’ll find all the answers there.

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