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
The NASD Over-the-Counter (OTC) Securities Exchange closed higher by 1.41 per cent on Friday, May 15, supported by four securities on the platform.
During the session, FrieslandCampina Wamco Plc added N14.24 to its share price to sell for N159.00 per unit, in contrast to the previous day’s N144.76 per unit.
Further, Central Securities and Clearing System (CSCS) Plc appreciated by N1.34 to N72.34 per share from N71.00 per share, Geo-Fluids Plc improved its price by 4 Kobo to N2.94 per unit from N2.90 per unit, and Industrial and General Insurance (IGI) Plc gained 1 Kobo to trade at 61 Kobo per share compared with Thursday’s closing price of 60 Kobo per share.
As a result, the NASD Unlisted Security Index (NSI) rose by 58.20 points to 4,188.41 points from 4,130.21 points, and the market capitalisation soared by N34.82 billion to N2.506 trillion from N2.471 trillion on Thursday.
During the session, the volume of trades went up by 180.8 per cent to 1.2 million units from 417,349 units, and the value of transactions increased by 29.8 per cent to N29.8 million from N23.2 million, while the number of deals fell by 22.6 per cent to 24 deals from 31 deals.
Great Nigeria Insurance (GNI) Plc ended the day as the most traded stock by value on a year-to-date basis with 3.4 billion units sold for N8.4 billion, followed by CSCS Plc with 60.8 million units exchanged for N4.1 billion, and Okitipupa Plc with 27.9 million units valued at N1.9 billion.
GNI Plc also closed the session as the most traded stock by volume on a year-to-date basis with 3.4 billion units worth N8.4 billion, followed by Resourcery Plc with 1.1 billion units transacted for N415.7 million, and Infrastructure Guarantee Credit Plc with 400 million units traded for N1.2 billion.
By Dipo Olowookere
The bears overpowered the Nigerian Exchange (NGX) Limited on Friday, sinking it further by 0.76 per cent when the closing gong was struck by 4 pm.
The nation’s flagship equity market was under selling pressure during the session, as investors booked profits after the shares witnessed price appreciation in the past trading sessions.
The energy sector was the most impacted, as it shed 4.43 per cent. The consumer goods index declined by 0.90 per cent, the banking counter decreased by 0.15 per cent, and the industrial goods sector lost 0.08 per cent, while the insurance counter gained 2.42 per cent, which was not enough to salvage the situation.
Consequently, the All-Share Index (ASI) contracted by 1,912.19 points to 250,330.92 points from 252,243.11 points, and the market capitalisation moderated by 1.225 trillion to N160.444 trillion from N161.669 trillion.
Zichis was the worst-performing stock for the session after it gave up 9.97 per cent to close at N29.43, FTN Cocoa slipped by 9.95 per cent to N8.96, The Initiates slumped by 9.90 per cent to N32.30, LivingTrust Mortgage Bank tumbled by 9.88 per cent to N3.83, and International Energy Insurance dropped 9.71 per cent to trade at N2.79.
The best-performing stock was ABC Transport, which grew by 10.00 per cent to N6.27. May and Baker also appreciated by 10.00 per cent to N47.30, SCOA Nigeria surged by 9.98 per cent to N33.05, Trans-Nationwide Express expanded by 9.97 per cent to N7.06, and DAAR Communications jumped 9.76 per cent to N2.25.
Yesterday, investors traded 1.1 billion shares worth N44.3 billion in 65,744 deals compared with the 1.0 billion shares valued at N41.6 billion transacted in 74,822 deals a day earlier. This indicated a dip in the number of deals by 12.13 per cent, and a rise in the trading volume and value by 10.00 per cent and 6.49 per cent, respectively.
Chams was the busiest equity for the day, with 328.5 million units sold for N1.1 billion. UBA traded 61.6 million units worth N2.7 billion, First Holdco transacted 58.7 million units valued at N4.2 billion, Secure Electronic Technology exchanged 51.9 million units worth N45.0 million, and Access Holdings traded 51.8 million units valued at N1.3 billion.
By Adedapo Adesanya
The last trading session of the week at the Nigerian Autonomous Foreign Exchange Market (NAFEX) ended on a negative note for the Naira on Friday, May 15, as it lost N15 Kobo or 0.1 per cent against the Dollar to trade at N1,371.04/$1 compared with the previous day’s N1,370.89/$1.
However, it further appreciated against the Pound Sterling in the same market segment yesterday by N20.77 to close at N1,830.61/£1 versus Thursday’s value of N1,851.38/£1, and gained N7.91 against the Euro to settle at N1,595.07/€1 versus N1,602.98/€1.
At the GTBank FX desk, the Naira lost N2 against the US Dollar during the session to sell at N1,383/$1 compared with the preceding session’s N1,381/$1, and at the black market, it remained unchanged at N1,385/$1.
The Naira is forecast to be broadly stable, supported by Dollar sales by the Central Bank of Nigeria (CBN) amid steady, higher oil receipts, with the market settling into a balance.
Policy direction is also expected to give the market some boost as the CBN said the new edition of the FX market guidelines will deepen liquidity, improve transparency and strengthen confidence in the country’s foreign exchange market.
According to the Governor of the CBN, Mr Yemi Cardoso, the update is due to changing global economic realities, domestic reforms and the need for a more coherent and forward-looking regulatory framework. According to him, the last edition of the FX manual was issued in 2018, making the latest review both timely and necessary.
Meanwhile, the cryptocurrency market plunged into the red zone as rising bond yields hit risk assets across markets, while traders are increasingly betting the Federal Reserve may need to raise rates again. Rising energy prices and resurging inflation could force central banks back into tightening mode.
Cardano (ADA) shrank by 4.4 per cent to $0.2557, Dogecoin (DOGE) slid by 3.7 per cent to $0.1104, Ripple (XRP) depreciated by 3.5 per cent to $1.41, Solana (SOL) crashed by 3.5 per cent to $87.81, and Binance Coin (BNB) slumped by 3.4 per cent to $659.64.
Further, Bitcoin (BTC) declined by 2.6 per cent to $78,547.49, Ethereum (ETH) lost 2.1 per cent to quote at $2,209.19, and TRON (TRX) tumbled by 0.7 per cent to $0.3509, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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