Lets get to the Analogy so as to understand in a layman’s way of how Forex actually works. When Jonathan was in Power, Dollar was at a time around 180 Naira to 220 Naira. Let’s just take the average and say 200 Naira.
When Buhari entered power some of you would recall that around 2016, at some point the dollar shut up to 500 Naira per one
Assuming you knew Dollar would appreciate against Naira like this and you had 2 Million Naira lying fallow in the Bank account. You knew from your experience as a Forex trader that uncertainty in Government weakens a currency pair and you used this your 2 million and bought dollars and kept in 2015
It would give you about $10,000.
1 year later, Dollar just escalated to 500 Naira per dollar and you went to the Bank cashed $10,000 and exchanged it back to Naira.
It would now yield you 5 million Naira (remember you just stocked 2 million Naira) that means you made 3 million Naira Profit.
Ask yourself did you use that 2 million Naira to do any Business? The answer is No. you practically did nothing. What you just did right here was Forex. You leveraged on the fluctuations in the Price of Dollar to Naira to make yourself Money without doing anything. You just sat at home while the Foreign Exchange market did the job for you.
This is basically what we do in Forex. This is not the normal market Oshodi or Idumota, Kaneshie market, Accra Mall etc. that you Buy and Sell clothes. For some that would as what you Buying and Selling.
This is just a raw Analogy because in Forex market it’s even more interesting. You don’t have to wait 1 year or months to make Money. These Currencies are constantly Fluctuating in minutes (what I usually refer to as Volatility) so it’s those opportunities caused by these Fluctuations in the Price of one Currency with respect to another that Forex traders make their money from because they happen daily. That’s why Banks would never allow you to learn Forex. They prefer you come to their Banks and fix the money for meager interest rates. To even shock you, investment Banks contribute more than 70% of the total Liquidity in Forex. They use your money to Trade. Drive big cars and Live in Big Houses and give you peanuts as interest or meager amounts as Salary.
In the above Analogy you would notice that you didn’t really Buy or Sell any real commodity to make money. You took advantage of the exchange in Exchange rate to make money.
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