AFROSWINGFX

Tag: forex

  • Opportunities in Equities and Forex Amid Declining Global Interest Rates

    Opportunities in Equities and Forex Amid Declining Global Interest Rates

    Opportunities in Equities and Forex Amid Declining Global Interest Rates: A Kenyan Perspective

    The economic fallout from Covid-19 continues to shape financial markets today. In response to the pandemic, central banks around the world lowered interest rates and governments implemented fiscal stimulus to support economic activity. While these measures provided immediate relief, they also contributed to rising inflation. To combat this, central banks raised interest rates to curb inflation. Although this strategy succeeded in controlling inflation, it led to higher borrowing costs, which in turn slowed down labour markets and made credit more expensive for both households and businesses.

    Now in 2024, we are witnessing a new shift as several central banks, including the U.S. Federal Reserve, are cutting interest rates again—this time in response to a weakening labor market.

    The Impact of Declining Global Interest Rates

    The rise in interest rates across developed economies after the pandemic had a negative impact on emerging markets, including Kenya. As capital flowed out of the country, money supply tightened and local interest rates soared. For example, government securities in Kenya offered a bond yield as high as 19% in an effort to attract lenders.

    However, with global interest rates now declining, financial markets are adjusting. In Kenya, this trend opens up new opportunities, especially in equities and forex markets. Lower interest rates, while initially unsettling, can create favourable conditions for investors willing to adapt.

    Global investors are increasingly turning to emerging markets for higher returns as interest rates in developed economies fall. In Kenya, we are likely to see an expansion of the money market, with more lenders entering the scene. This will reduce borrowing costs for households and businesses, offering a chance to refinance debt at lower rates. On the downside, returns on government securities will likely decrease as interest rates drop, meaning lower income for those relying on such investments.

    Opportunities in Emerging Markets: A Kenyan Perspective

    Declining global interest rates usually translate into cheaper credit and increased liquidity. This influx of liquidity can lead to more investment in stock markets, and Kenya’s Nairobi Securities Exchange (NSE) could benefit from a surge in foreign capital. Increased demand for Kenyan equities is likely to drive up share prices, creating opportunities for local investors to achieve capital gains.

    With bond yields declining, many investors will likely shift to equities that offer stable dividends. Kenyan companies like Safaricom and Equity Bank, which have a strong track record of delivering consistent dividends, are expected to attract both local and international investors. The resulting increase in demand for these stocks could boost their prices, making them appealing investment options.

    Another area for growth is in forex investments. Although the forex market is often seen as high-risk, it presents a significant opportunity for wealth growth and diversification. Kenyan forex brokers have developed platforms that connect investors with experienced traders, offering a marketplace where investors can earn passive income. As returns in other sectors decline, the forex market may become an increasingly attractive option for Kenyan investors looking for diversification.

    Conclusion

    While a global decline in interest rates may seem daunting, it creates unique investment opportunities in Kenya, particularly in equities and forex markets. Investors who are agile and can adapt to the shifting landscape stand to benefit significantly. As always, thorough research and strong risk management are crucial to making informed investment decisions in this evolving financial environment.

  • Why forex traders fail.

    Why forex traders fail.

     Why many forex traders fail.

     This topic explores how uninformed expectations often lead to failure in forex trading.

    The internet is littered with people explaining how they lost money in forex trading or how forex is a scam. In your circle of friends and family, should you make the mistake of mentioning forex trading, you are likely to get salty looks.  For many, forex trading equals failure and heartbreak.

    To further emphasize the magnitude of failure in this industry, forex brokers issue disclaimers on their websites indicating failure rates ranging from 75-90%. To put it into perspective, out of 1000 individuals who venture into forex trading, up to 900 inevitably will fail and lose their entire capital outlay. A sad statistic indeed. I must admit, in my 10-year trading career, I have formed part of that painful statistic. Read my story here

    Why do we fail? I wonder?

    Presently, I seem to gravitate towards the belief that fundamentally, our failure is primarily driven by divergence between understanding and expectations. I posit further when we place a premium on expectations over understanding, we should prepare for rather painful results. From experience, many enter the forex trading space driven by expectations, not understanding.

    By definition, understanding is awareness. Expectation is defined as the belief that something will happen. Let me illustrate how the divergence between understanding and expectation causes failure.

    Recall your childhood years watching your favorite superhero, say, superman. Watching the indestructible Superman flying around fighting bad guys was quite a motivator. Children are impressionable, therefore, it wasn’t hard to find young boys mimicking Superman’s behavior to the degree we thought we could fly. It was common to find boys leaping off tables and high surfaces believing and expecting they could fly. At this point, gravity, or the understanding of the effects of gravity was a foreign concept. Later on, of course, gravity was introduced to us painfully, sometimes with an accompanying injury and or beating from our mothers. I believe this reminder illustrates the outcomes when understanding and expectations are not aligned.

    Back to forex trading. If we are honest, we lose not because we seek understanding and mastery, we lose because we seek to fulfil our expectations. The promise of a lavish lifestyle, and the allure of making X % per month without struggling appeals to many. Ultimately, this leads to disastrous decisions that end in heartbreak.

    How do you bridge the gap between understanding and expectations?
    1. Education and continuous learning

    I am in my fourth profitable year in forex trading. What is different, my desire to consistently improve my knowledge is constant. I am always learning new things that improve my skills and edge. I am not the same trader I was six months ago. See my performance

    1. Set realistic goals.

    Early in my trading career, I would set goals out of desire and ignorance. Consequently, I would trade aggressively and force the markets to meet my expectations. The outcome was always disastrous. Presently, I target a 20% return annually based on experience. This target is achievable and less risky, allowing me to outlast seasons.

     

    In conclusion, mastery is only achieved through understanding. I leave you with a verse from the Bible to reinforce the above statement, Proverbs 4: 5-9

  • MY FOREX TRADING JOURNEY; A KENYAN ODYSSEY

    MY FOREX TRADING JOURNEY; A KENYAN ODYSSEY

    MY FOREX TRADING JOURNEY; A KENYAN ODYSSEY

    The beginning.

    The year is 2014, a recently employed young man stumbles upon forex trading information. Ever interacted with a young ambitious Kenyan? You can feel the eagerness almost reckless drive and desire to `make money’. I was no exception. Quickly I signed up for a demo trading account with Windsor Brokers and practiced barely for 3 months. With 300 dollars saved up, I opened an account with Alpari Brokers (notice the shift). With my little experience, my style was heavily reliant on technical indicators, particularly Relative Strength Indicator otherwise known as RSI.  For beginners, I promise to write an article on why I don’t use technical indicators. My trading rules centered on a  daily profit target of 10 dollars and NO trading on Fridays. My first trading day was on a Thursday, I went short on USDJPY. By the close of the day, I had made my 10 dollars profit, I was now a forex trader, or so I thought.

    Mistakes and lessons

    I get up one early Friday morning, against all wisdom,  I decide to trade.  After all,  who doesn’t want an extra 10 dollars. By noon I was down 170 dollars, by evening I had lost 300 dollars, all that was left in my account was 10 dollars. At this point I feel the need to tell people that once forex breaks your heart, nothing can ever come close, you are immune. I took a short hiatus to deal with my pain. Close family members and a friend lent me 500 dollars; I was back in the market. This time I promised myself to be cautious and I did make some money using RSI. Initial profits had me thinking, this is easy, how wrong I was. I had made myself a second promise not to ever trade on my phone. One Easter morning I got on my MT4 app on my phone (second mistake) and went short on USDCHF . Later in the day I am down by 225 dollars, then it dawns on me, I had traded 1 lot instead of 0.01 lot. You can imagine how this particular story ends.

    Ignorance and Greed

    The year is 2018, after 4 years of nursing my wounds, I am back, armed with knowledge on forex patterns and 1,000 dollars capital to boot. I would proceed to make approximately 50 dollars a week for two months and my capital grew to approximately 1,300 dollars. I traded all forex pairs I could think of in pursuit of maximum profit, recall the reckless desire to make money? In summary I blew the account and yours truly was now 1,600 dollars poorer since 2014.

    Hard decisions

    At this juncture, you have two options, quit or persevere. In 2019, I decided to move away from currencies to synthetic indices. The decision was as adventurous as it was expensive. I deposited 500 dollars and proceeded in my journey. My main motivation for trading indices was that the market never closed, automatically it meant more opportunities, lets phrase it correctly; greed. Within the first week of trading, I was up by 300 dollars, truly, this was the best decision I thought. By the following week, I had added 300 dollars capital to cover my negative position, you can guess what happened. I lost it all.

    I came to once conclusion, I can make money but I cannot keep it. Common sense would dictate I focus on acquiring additional or even different knowledge to stem further losses. Common sense did not prevail, instead I took part of my school fees and deposited as my trading capital. Luckily, I was able to make some profit and withdrew the school fees. My account grew from 800 dollars to 3,000 dollars. I was teeming with confidence or was it pride? I blew that too.

    False Competence and confidence

    Mid 2020, I liquidated an asset and deposited 3,000 dollars and went back. I believe I was displaying signs of addiction and if you judged me so, I would understand. I managed to trade successfully from 3,000 dollars to 14,000 dollars and then to 20,000 dollars. In Kenyan currency, I was a millionaire on paper. If you have ever tried the aforementioned synthetic indices you know they make crazy moves engineered by a computer simulation, not real market conditions. I woke up one morning and all my capital was gone, the entire 20,000 dollars. I was numb. At this point, my entire trading career has amounted to losses of 25,000 dollars.  It was time to admit, whatever knowledge I though I had was useless. It was time to go back to the drawing board.

    Recovery and growth

    Prior to my last loss, I kept interacting with traders who kept mentioning smart money concepts and supply and demand. Evidently, they seemed to know what they were doing. I decided it was time to study a new concept from the beginning. For 9 months in 2021 I studied and traded my demo account with EGM securities. Gradually my competence and confidence improved.

    The Bible, Hosea 4:6 is fit for my journey “My people are destroyed for lack of knowledge…..”. Right knowledge is freedom. September 2021, I deposited money in to my account and went back to trading, having learnt my lessons.

    As I write this, I am consistently building my portfolio with HF Markets, FXTM and Windsor Brokers. In October 2024, I shall clock one year as a strategy provider with Windsor Brokers, and 2 years with HF Markets. I see progress, gradual consistent progress. Check out my performance Windsor Brokers profile

    Have I seen growth and maturity as a trader? definitely. Has my mental orientation and approach changed? You bet. Have I made it to the top, not even close, I am making progress. I make it a habit to always share my journey as the first content I cover in my course.

    In conclusion, my journey to recovery and growth is on course, stick around, I will share it with you.