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Here's the deal: You may read the information on the site for free and ask questions. As and when I have the time I'll answer the questions on the website and add new articles. Please do not consider it to be advice - the only free investment advice is to apply your own mind. If you are worried about your investments, I am willing to have a look and improve it. If you are destitute I will try to help free of charge (but you join at the back of the queue). If you are not destitute then email me and we can agree a lower fee (percentage terms, repeating monthly, is fine) than you are currently charged. I have limited time available, and will prioritise the work accordingly, so please be patient. Email me at invest@freeinvestmentadvice.org detailing the situation for which you'd like advice. Rob Baker

Forex trading in South Africa

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Forex trading, or foreign exchange market trading (or FX trading) typically involves a party purchasing a quantity of one currency in exchange for a quantity of another currency (for example, purchasing 1 US Dollar in exchange for 8 South African Rands). Forex trading facilitates international trade (e.g. a company in South Africa importing goods from China) as well as speculation on the value of the currencies, and changes in interest rates.

Currency speculation

Currency speculation is a high risk affair, with the possibilities of large losses being made. Do not let your greed get in the way of what makes sense. Foreign exchange futures instruments are a zero sum game, which means that what one player makes another loses (in fact it's a negative sum game after trading costs are taken into account). Even large savvy well-resourced financial institutions make losses playing this game. Suffice to say the odds are stacked heavily against an individual wanting to gamble in this market.

Forex courses

Apply extra caution to those offering forex courses which promise to make you an expert in a few weeks - it's not possible. If any snake oil salesman guarantees you making money playing forex markets, run away from them as fast as you can. These salesmen often earn large commission of 30%+ to get you to buy trading programmes with fancy computer graphics.

Definitions

The quotations "USDZAR 8.0103" means that 1 United States Dollar may be traded for 8.0103 South African Rands. ISO 4217 country codes are used.

Forex instruments

Spot transactions, forward transactions, swap transactions, futures transactions and option transactions.

Theories explaining currency fluctuations

There are numerous theories to explain currency fluctuations (all of which have issues), amongst them being:

  1. That currencies fluctuate so as to achieve equality in purchasing power or interest rates.

  2. Currencies fluctuate based on current account deficits and surpluses

Ultimately, currency prices fluctuate as a result of shifting levels of supply and demand.

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