Why forex trading in Africa grew by 476% during the first quarter of 2020

It's pretty much old news that the virus situation has had a major effect on forex trading worldwide.

Many companies have seen their sales decrease, countries have seen their economies hang by a thread and economic situations have wreaked havoc on their national currencies in the fight to stay strong against the dominating USD.

Africa's 53 countries weren't spared from this situation. Instead of withdrawing from the forex, currency trading in African countries has been on the rise, despite the virus situation.

The influx of Africa's traders to the forex has several explanation, and could very well be a turning point for many local currencies that are competing against the USD.

This increase could also open up investment opportunities in other economic markets, with Africa's traders exploring the many other investment options they have.

Reasons for forex's dramatic rise in Africa

More people were confined to their homes

As the virus situation spread around the world, more and more governments imposed strict travel restrictions to curb the spread of Covid19, resulting in lockdowns where everyone was contained at home for many weeks.

During this time, and due to fears of unemployment, income security and the search for opportunities to secure additional income, more and more people have turned to the forex to make some extra cash.

People have had a lot more time to learn how to trade and develop trading strategies.

Africa's traders were able to spend more time refining their trade tactics on demo accounts as well. 

The forex is the world's largest market

Even before the virus situation and the impact it had on currency trading, the forex was the largest market among others and the sudden influx only increased its importance.

The daily forex trading volume is around $5 trillion, which increases market liquidity through the constant exchange of currencies.

There are many brokerage firms, and they operates 24 hours a day, 5 days a week, so this is great for those who work during the day and want to trade the Asian or US sessions.

Low transaction costs

Due to high liquidity, trades are executed faster, which translates into lower transaction costs and, therefore, allows a greater number of Africa's traders (who often don't have much money) to join the forex.

Leverage

Thanks to leverage, Africa's traders can take larger positions in order to increase their chances of making large profits, and gains can benefit greatly from this.

The maximum leverage that is allowed is determined by the broker, the jurisdiction to which it belongs and also by the regulatory entity or entities that govern its regulation.

Some brokers, such as those regulated by the UK's FCA, are limited to a leverage of 30:1, while others, mainly offshore brokers, are able to offer traders way higer leverage, as much as 3000:1.

Africa's traders mustn't forget, though, that leverage can also increase the magnitude of a loss.