Potential investors’ ability to make profitable bets in financial markets, such as the currency market, has been undermined by low disposable income and high rates of poverty in Nigeria. A PWC report indicated that poverty in Nigeria is expected to rise to 38.8% by 2024. Even with the nation’s low unemployment rate, low consumer spending and purchasing power continue to be problems, which makes it very difficult for regular retail investors to profitably speculate on market movements.
Buying or selling currencies to profit is known as forex speculation. A speculative investor is probably one who is watching price movements closely. Even though there is a high level of risk involved, investors are usually more focused on making a profit based on fluctuations in the investment’s market value than they are on long-term investing.
If a currency is pegged to a particular level, for example, and investors feel the currency is overpriced, they would begin selling their reserves, which would drive the price lower.
A significant number of Nigerian residents also access the black market for a variety of legitimate reasons, but it’s important to remember that there are also illegal financial flows, currency rackets, arbitrage, and indiscriminate round-tripping occurring there.
Within the first two years, 80% of all-day traders give up. About 40% of all-day traders only day trade for a single month. Thirteen percent of day traders still do so after three years. Five years later, only 7% are still there. Winners are sold by traders at a 50% premium over losers. Forty percent of sales result in losses, while sixty percent of sales are profitable.
Professionals are not the only ones who can engage in speculative trading, but successful navigation does demand a certain level of expertise. Professionals and novices alike can participate in speculative trading, but it’s critical to comprehend the risks and have a well-thought-out plan in place.
You must educate yourself on market trends, technical analysis, and risk management before engaging in speculative trading. Only 1.6 percent of traders are profitable day traders on average over a year. Nevertheless, 12 percent of all day trading activity is made up of these extremely active day traders.
Speculators, on the other hand, often experience tremendous pressure on their portfolios in this kind of market environment, and long-term investors are much better positioned to weather these storms. Speculation is a strategy that carries a high risk of loss but also has the potential for a sizable reward. Trading high-risk opportunities with the potential for significant rewards is the major goal of FX market speculation. However, it also calls for a substantial amount of capital, effective risk management techniques, emotional self-control, and a firm grasp of market dynamics.
You run the risk of losing more money than you initially put up if your total exposure to margin trades is higher than it is. Long-term investing is a more secure and dependable approach to creating long-term wealth, despite the allure of quick gains.