The financial sector clean-up by the Bank of Ghana (BoG), which started a couple of years back exposed financial institutions with weak fiscal strength and dealt a heavy blow to customers who had savings and investments with the affected institutions.
The clean-up which sought to bring sanity and strengthen the banking sector led to the revocation of licences of some banks while affecting other financial institutions.
The BoG reforms are still ongoing, this time with focus on insolvent microfinance companies, fueling swathes of panic withdrawals amidst fears and although some heads of institutions hard hit by the move have made public statements to assuage fears among customers, it has done very little to help the matter as disgruntled customers continue to cause commotion at the premises of these institutions demanding their locked up cash.
This, also backed by the tumbling of a major gold dealership and investment firm that promised out of the world fat investment returns but ended up being closed down following a row with the Securities and Exchange commission (SEC), made it a daunting task for many wanting to engage in genuine investment opportunities with financial institutions and putting investors in dilemma, whether to keep their hard-earned money or to try other means of investment like Online Foreign Exchange (Forex) trading
Online or retail forex trading has been on a steady rise in Ghana for about 4 years now with many trying their luck.
What is Retail forex trading?
Retail/Online Forex trading is a minute section of the larger foreign exchange market where individuals or traders invest on the exchange rate between varying currencies.
This has been made possible thanks in part to high internet penetration which facilitates online trading platforms. A report in 2016 posits that retail forex trading accounts for 5.5% of the whole foreign exchange market of $282 billion daily.
Currently, and although with no data to back this claim, the number of Ghanaians involved in trading is telling with more people joining in and making profits.
Observers say, the upsurge of interest is mainly due to the “get-rich-quick” perception which has also made it a target for fraudsters.
“People have the perception that forex trading can help you become a millionaire but it doesn’t happen like that. It’s a process, you won’t become a millionaire overnight,” says Dede E Adjanke, a business development team leader with a forex trading school who’s been trading for the past 2 years.
“My first month in trading taught me it isn’t a get-rich-quick-scheme but needs a lot of patience and practice to master the skills to be successful,” David Omane Brempong, a third year Accounting student at KNUST who is also a part-time trader confirmed.
One other thing that prospective investors should look out for is the risk involved because forex trading, like many other high-yielding investment schemes involves risk which requires one to be au fait with risk management mechanisms before committing.
“Forex trading is very risky if you don’t understand how it works and how to apply risk management. You need to sharpen your trading skills to become better at it,” Dede further explained.
“I nearly blew my trading account because I was greedy and a bit scared of losing money but with advice and encouragement from my mentor I started to trade targeting 5% profit daily and also with a strict compliance to risk management rules,” Omane Brempong also said.
With a set ambition to enter the real estate market, Brempong says he has bagged $3000 on total investment of $16000 ( including tuition fees).
In an interview with Business World Ghana, Sozos Nicolaou of Orbex inc, an international forex broker based in Cyprus that also holds forex trainings in Ghana explains that it is dependent on the individual to know the risk involved before trading as it’s a risky yet an opportunity to make money.
“You need to know your budget and how much you are willing to risk. Don’t risk money you can’t afford. It’s good to learn by starting off with a demo account for a few weeks and getting to know the basics as it’s the most important in forex trading,” he advised.
The Chief Executive Officer of Gold Forex Institute, Louis Boah reaffirmed the risks involved but shared some prevention mechanisms.
“There are risks involved, however, unlike other types of investments, the platform for trading forex (mt4, mt5, webtrader, etc) provides accessibility to risk management tools that helps one to minimize it and maximize returns”
Boah who set up his training institute in 2017 to mentor people interested in trading forex and has been an active trader for a decade shared his frustrations in getting the Securities and Exchange Commission (SEC), and Bank of Ghana (BoG) to regulate online forex trading activities in the country like it’s been done in Kenya and South Africa.
The regulation when effected, would rake in more revenue into Ghana while stemming fraud associated with the industry, he says.
Things to know before trading in online forex in Ghana
• Learn the basics of online forex trading (there are a lot of educational resource materials online)
• Do not jump straight into trading after that, enrol in a registered forex trading school to learn the rudiments of the trade.
• Get yourself a mentor in the field (an expert in trading) to guide you till you are able to stand on your feet.
• When you are prepared enough to trade, start with a demo account to practice before you invest money into it.
• You need to know your budget and how much you are willing to risk. Don’t risk money you can’t afford to lose.
• Strictly adhere to risk management principles.
• One can start trading forex with just $10 but it is advisable to start with a higher amount to help place a lot of trades and employ better money management and risk management techniques.
• An inside source at the Securities and Exchange Commission (SEC) disclosed that online forex trading/retail trading has not been licensed by his outfit in Ghana and so investors trade at their own risk (Keep that in mind).
• Some trading platforms or brokers in Ghana are registered by accredited institutions based in other countries so ensure a thorough background check before trading on any platform.
By Pamela Ofori-Boateng/ Business World Ghana/ copyright© 2019