How inflation affects Forex trading

Inflation has in recent days jumped into the limelight and is now a growing concern for investors in Kenya, especially with the Kenyan shilling losing ground against major currencies such as the US dollar, Euro, Sterling and more. As a result, investors in Kenya are constantly looking for investment opportunities that can protect their wealth from the adverse effects of inflation. One such opportunity is investing in the foreign exchange market or Forex.

Forex trading involves the buying and selling of currencies with the greater aim of making a profit from the fluctuations in exchange rates across financial markets. Investing in Forex market is very suitable for investors who seek to diversify their portfolio, as it enables them to hedge against the inflationary risks associated with the decline on the value of the Kenyan shilling.

Investors always stand to gain in several ways on the Forex market during times of rising inflation. For one, the Forex is the most liquid market in the world, with over $7.5 trillion traded every day. This implies that investors can easily buy and sell other currencies within their preffered times, making it easy for them to take advantage of market opportunities and to manage their risks.

Moreover, Forex also provides investors with a high degree of leverage. This implied that traders can control large positions on the market with a relatively small amount of capital. This leverage capabilities makes it possible for investors to amplify their returns, even in the face of inflation. Additionally, Forex trading is not restricted by geographical boundaries, which means that investors in Kenya can trade with any part of the world.

Despite the various benefits associated with Forex trading during times of inflation, there are also some risks that investors should be aware of. For instance, Forex trading is a highly volatile market, and prices can fluctuate rapidly and unpredictably. This means that traders need to be cautious when trading Forex and to have a good understanding of the market dynamics.

Another risk associated with Forex trading is the potential for fraud and scams. There are many unscrupulous brokers and traders out there who are looking to take advantage of unsuspecting investors. As such, investors in Kenya need to be careful when choosing a Forex broker and to do their due diligence before investing their money.

Before signing up with any company you should research the following online – How long have they been in business? Do they have physical offices? Have they won awards? Do they have a good reputation? 

CMTrading is a fully licensed and regulated broker. The company is a Financial Sector Conduct Authority (FSCA) approved broker since 2012 and is also regulated by the Financial Services Authority (FSA).

As a conclusion, forex Markets pose an attractive investment opportunity for Kenyan investors seeking to protect their wealth from the risk of inflation. With the high liquidity, leveraging, and global reach, FX stands the best amongst other securities with the potential to generate significant returns for investors. Investors should however be aware of the risks involved and to take appropriate measures to manage their risks.

Source; Kenyan wall street

Leave a Reply

Your email address will not be published. Required fields are marked *