How to trade in forex?
National currencies are traded everyday on the foreign exchange market. In forex trading, you buy or sell a currency for another based on mutually agreed rates. As it’s traded in pairs, the CFA franc (XAF) and the US dollars (USD) for example, you’re betting on the movement of exchange rates between XAF and USD. Like stocks, you sell when the value is high and buy when the value is low to turn a profit.
While the change in value is measured in small increments, you can maximize profit by using leverage. Leveraging means banks and brokers let you trade a huge amount for only a fraction of the capital invested. FXCM highlights that while leveraging increases your profit potential, it can also increase your losses beyond your deposited funds. This is why you should start with lower leveraging ratios until you become more comfortable with trading.
Forex trading is also unique as it’s a market open for 24 hours—giving you profit opportunities around-the-clock.
The CFA franc
While you can trade almost any currency pair on the forex market, it’s best to trade with one that you are familiar with. Foreign exchange rate changes are subjected to a host of factors including inflation, terms of trade, public debts, current account deficit, economic performance and political stability.
Cameroon trades with the Central African Franc (CFA). The most popular pair to trade CFA is the XAF/USD. The CFA franc is the currency used by the Francophone Africa and reflects not only Cameroon’s economic activities but also that of the region.
The 14 countries in the two regional unions – Central African Economic and Monetary Union (CEMAC) and the West African Economic and Monetary Community (WAEMU) – decided to continue using the CFA franc even after gaining independence.
