Economy
How a Small Business Owner Can Invest in Forex
Elevate your small business by increasing your available capital through our guide on how business owners can invest in the forex market.
How to Invest in Forex as a Business Owner
Most people who are building a retirement nest egg or hoping to make a big purchase may want to grow their savings through investment. Forex is very useful for such a purpose, as there are few barriers to entry and the learning curve is not very steep.
What many do not realize, however, is that small businesses can also benefit from trading forex. Using platforms such as OANDA, small business owners can ensure they have access to money in other currencies while investing their capital with the hopes of turning a profit on most trades.
Below is a guide that explains how you can start investing in currency today as a small business owner.
Why Currencies Fluctuate in Value
The key to investing in any asset or security is to predict whether the asset in question will rise or fall in value. Stocks fall and rise based on the perceptions of a company and its performance. Currencies rise and fall in value based on supply, demand, and other factors.
Currencies with high inflation are likely to see a drop in the value of their currency, as the country has less purchasing power due to inflation. Higher interest rates can also impact currency values, raising them, as investors who have money in that currency can now get higher returns on their funds. Lower interest rates usually see a drop in currency value.
Political stability, government debt, and the amount of foreign currency the central bank of the country in question owns can also impact the value of that country’s currency. If there is instability, the currency is likely to fall in value, while central banks can use foreign currencies to weather volatility in their currency’s value.
Why Trade in Currencies?
Many business owners may wonder why they need to trade in currencies. There are two primary reasons: having access to money in other currencies and making a profit on your existing capital.
If you have money sitting in your business account, putting it to use in the forex market is a great way to increase returns. Rather than keeping it in a company checking or savings account, you can get better returns through trading forex a few times a week.
Even if you are not interested in growing your capital through forex, but you plan to do business in other countries, using the market is useful. The forex market can help you access the best exchange rates while accruing small profits on trades.
Types of Forex Trades
There are two significant forms of trading foreign currencies, spot trading and futures trading. A spot trade is extremely simple, as you agree to exchange currencies with another party at a set price. The exchange rate is determined by the present value of both currencies.
A futures trade is a little more complex, as it involves buying or selling a currency for another at a set future date. A trader may engage in a futures trade if they believe the value of a currency will rise or fall within a set period of time.
Currency Pairings
When you first create an account at a site that allows you to trade on the Forex market, you will likely see a lot of currency pairings. You are trading in pairings, such as GBP/USD or EUR/USD. The pairings signify the two currencies you are exchanging, such as exchanging a Great British Pound for a United States Dollar or a Euro for a US Dollar.
The currencies that make up most of the Forex market are the US Dollar, Canadian Dollar, Great British Pound, Euro, Japanese Yen, Australian Dollar, and the Swiss Franc. You can trade other currencies, but finding other investors to complete spot trades and futures trades may be a little more difficult.
Liquid, 24-Hour Market
A significant advantage of the Forex market is that you are taking part in a highly liquid market that is active nearly 24 hours a day, seven days a week. Trading in foreign currencies opens on Monday morning in Australia and Asia and is ongoing 24 hours a day until Friday evening in the United States or South America.
The Forex market is extremely liquid, as you can complete spot and futures trades in a matter of seconds. If you are trading major currencies, finding a buyer that takes the opposite view of your investment is extremely easy.
Grow Your Business Through Forex
Business owners need to take advantage of every available resource if they are to grow their capital. Whether you are accessing capital through business loans, investors, or other means, you can increase the money available to your operation through trading.
While you may not have time to become an expert in stocks, the forex market is a lot easier to learn. Trading Forex allows you to access foreign currencies, which may be useful for doing business in other countries. You can also make a profit on most trades, provided you have some understanding of how the forex market works, and why currencies rise and fall in value.
If you are self-employed or running a small business, leveraging the forex market is a great way to put your capital to use.
By Adedapo Adesanya
Seven price gainers triggered a 0.73 per cent appreciation in the NASD Over-the-Counter (OTC) Securities Exchange on Tuesday, January 13.
The advancers were led by FrieslandCampina Wamco Nigeria Plc, which added N5.06 to its value to close at N75.00 per unit versus the preceding day’s N68.70 per unit, followed by MRS Oil Plc, with a price appreciation of N5.06 to sell at N200.00 per share compared with the previous session’s N194.94 per share, and Air Liquide expanded by N1.00 to settle at N14.00 per unit versus N13.00 per unit.
Further, Food Concepts Plc climbed by 31 Kobo to N3.37 per share from N3.06 per share, IPWA Plc appreciated by 11 Kobo to N1.23 per unit from N1.12 per unit, Geo-Fluids Plc grew by 6 Kobo to N6.90 per share from N6.84 per share, and Acorn Petroleum Plc grew by 1 Kobo to end at N1.29 per unit versus Monday’s closing price of N1.28 per unit.
The gains recorded by these seven securities raised the market capitalisation by N15.95 billion to N2.2 trillion from the preceding session’s N2.184 trillion, and the NASD Unlisted Security Index (NSI) added 26.65 points to close at 3,678.13 points compared to 3,651.48 points.
Business Post reports that three stocks she weight yesterday, with Afriland Properties Plc down by N1.49 to N14.73 per share from N16.22 per share. Central Securities Clearing System (CSCS) Plc went down by 64 Kobo to N40.13 per unit from N40.77 per unit, and UBN Property Plc lost 1 Kobo to close at N2.05 per share versus N2.06 per share.
Yesterday, the number of deals executed soared by 39.6 per cent to 67 deals from 48 deals, the total value of transaction surged by 84.1 per cent to N86.1 million from N46.8 million, while the volume of trades shrank by 59.6 million to 1.6 million units from 4.03 million units.
CSCS Plc was the most active stock by value on a year-to-date basis with 2.0 million units sold for N81.4 million, trailed by MRS Oil Plc with 265,697 units worth N53.1 million, and Geo-Fluids Plc with 6.4 million units traded for N43.4 million.
By volume, Geo-Fluids Plc topped the chart with 6.4 million units valued at N43.4 million, followed by Industrial and General Insurance (IGI) Plc with 3.1 million units transacted for N1.9 million, and CSCS Plc with 2.0 million units valued at N81.4 million.
By Adedapo Adesanya
The value of the Naira further appreciated against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Tuesday, January 13 by N1.80 or 0.13 per cent to N1,419.66/$1 from Monday’s N1,421.46/$1.
This was boosted by an inject of $50 million into the official forex market by the Central Bank of Nigeria (CBN) in an effort to defend the local currency.
At the same spot market, the Nigerian currency improved its rate against the Pound Sterling during the session by N1.86 to close at N1,913.98/£1 versus the previous day’s N1,915.84/£1 and gained N5.09 on the Euro to settle at N1,656.59/€1, in contrast to the N1,661.68/€1 it was transacted a day earlier.
At the parallel market and the GTBank FX counter, the Naira maintained stability against the DOllar yesterday at N1,490/$1 and N1,431/$1, respectively.
Market analysts have noted that proper CBN support, stronger external inflows from foreign portfolio investors (FPIs), improving current account dynamics, and more disciplined FX management will give the Naira stronger footing in the near term, with threats coming from externalities.
Meanwhile, the cryptocurrency market was elevated on Tuesday as US inflation eased and political uncertainty around the Federal Reserve increased demand for non-sovereign assets.
Ease in US inflation data reinforced expectations that the Federal Reserve will continue cutting rates this year. Lower inflation eased pressure on bond yields and improved liquidity conditions, a setup that has historically favored crypto and other risk assets.
Also, reports that the US Justice Department had served grand jury subpoenas on the Federal Reserve earlier this week unsettled markets and weakened the Dollar, boosting the appeal of assets viewed as insulated from central bank risk.
Cardano (ADA) surged by 7.5 per cent to $0.4206, Ethereum (ETH) appreciated by 6.2 per cent to $3,321.77, Dogecoin (DOGE) grew by 5.8 per cent to $0.1472, Ripple (XRP) rose by 3.9 per cent to $2.14, Binance Coin (BNB) expanded by 3.1 per cent to $936.96, Litecoin (LTC) jumped by 3.1 per cent to $78.58, Bitcoin (BTC) increased by 2.9 per cent to $94,662.42, and Solana (SOL) soared by 1.6 per cent to $144.03, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 apiece.
By Dipo Olowookere
The bulls have refused to leave the Nigerian Exchange (NGX) Limited as they further lifted the market by 1.59 per cent on Tuesday on the back of continued bargain-hunting.
The bourse recorded a significant rise yesterday as a result of the gains posted by some large-cap equities, including MTN Nigeria and others.
The sterling performance was across the key sectors of Customs Street, except the insurance counter, which went down by 0.06 per cent due to mild profit-taking.
However, the banking segment appreciated by 1.33 per cent, the consumer goods index soared by 0.74 per cent, the energy index grew by 0.39 per cent, the industrial goods space gained 0.10 per cent, and the commodity landscape improved by 0.01 per cent.
As a result, the All-Share Index (ASI) moved up by 2,592.63 points to 165,837.32 points from 163,244.69 points and the market capitalisation increased by N1.661 trillion to N106.182 trillion from N104.521 trillion.
Caverton, PZ Cussons, Deap Capital, eTranzact, and MTN Nigeria all gained 10.00 per cent during the session to settle at N7.70, N58.30, N3.63, N18.15, and N605.00, respectively.
However, Universal Insurance lost 6.25 per cent to close at N1.20, Prestige Assurance declined by 5.81 per cent to N1.62, Regency Alliance slumped by 5.17 per cent to N1.10, Academy Press depreciated by 5.06 per cent to N7.50, and Royal Exchange dropped 3.98 per cent to sell for N1.93.
A total of 55 stocks ended on the advancers’ log and 13 stocks finished on the laggards’ end, indicating a positive market breadth index and bullish investor sentiment.
The activity level was mixed, with the trading value up by 75.00 per cent to N33.6 billion from N19.2 billion.
But the trading volume was slightly down by 8.33 per cent to 1.1 billion shares from the 1.2 billion shares recorded a day earlier, as the number of deals decreased by 17.09 per cent to 49,216 deals from 59,359 deals.
For another trading day, Sovereign Trust Insurance led the activity chart with the sale 343.5 million units shares worth N1.1 billion, Access Holdings traded 86.2 million equities valued at N2.0 billion, eTranzact transacted 61.1 million stocks worth N1.1 billion, Linkage Assurance exchanged 49.9 million shares valued at N88.0 million, and Chams pulled a turnover of 35.4 million equities for N139.2 million.
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