Forex Trading in Brazil

Political corruption, divisiveness and financial mismanagement have contributed to Brazil facing a fundamental threat to its free market principles. The value of the Brazilian real declined more than 14% in 2020 alone. President Bolsonaro, who once boasted that he had no knowledge of economics, seemed only to exacerbate the economic crisis that began in 2014 and continued to fall in 2020 due to COVID-19. If you're going to trade in this market, you need to know the particulars of forex trading in Brazil.

The forex market has emerged as a way for many Brazilian retail investors to stabilize their financial portfolios and invest outside of the country’s economy. Forex investors in Brazil move $20 billion on a daily basis, which translates to $5 trillion annually including futures and spot trading. If you are interested in forex trading, read on for everything you need to know to get started.

Get Started with Forex in Brazil

The Brazilian central bank is supporting measures to modernize the country’s forex regulations. One bill aims to extend the real’s convertibility by reducing barriers to foreign business and update the decades-old forex law. Regulation on the retail scale is managed relatively well within the country, protecting Brazilians who choose domestic brokers. 

The Belize-based International Financial Services Commission (IFSC) also provides a regulatory structure to many forex brokers marketed in Brazil. These are all advantages to the Brazilian investor. With that in mind, here are the steps to follow to get started in the forex market in the country:

1. Get a good Internet connection. Consistent forex trading depends on a strong Internet connection. The window of opportunity is short with some trades, and you don’t want latency in your trade execution.
2. Pick the right broker. Your broker is the entity that executes your transactions. Choose a reputable broker that is regulated and has good reviews.
3. Open an investment account. Once you have your broker, you’ll go through a process to verify yourself.
4. Fund your account. Bring in the initial funds for your investment account from your bank account or a debit card. You may have different options depending on the broker you choose.
5. Get your trading software. Your broker will usually have a user interface for trade. If you choose a broker that doesn’t, you can choose from many 3rd party standard software packages.
6. Trade. You are ready to trade, although you may want to start with a virtual account (working account that uses fake money).

Brazil Forex Trading Strategies

Trade forex more successfully in Brazil with these important strategies that every investor should know:

Day Trading

Also known as high-frequency traders or scalpers, day traders profit from investing quickly and precisely. A day trader is in all cash at the end of each day and may only hold an investment for a few seconds. Some high-frequency traders may use bots or automation software to execute multiple trades every second. Institutions and market makers trade this way although retail traders can use these tools as well.

If you are going to day trade, you need to have the ability to move quickly within the market. Scalpers take profits and losses quickly. The forex market has less volatility than traditional securities, but it’s still there. High-frequency traders don't want the market to move in a significant way in either direction during a trade. 

Trend Trading

Over the course of days or weeks, a currency may trade within a range or begin a trend. A range creates support and resistance levels that give signals about when to buy and sell. Currency trends are directional and a good investor can profit from an up or down movement.

Trend traders are also called mid-term traders. The length of time they hold an investment is usually longer than the day trader.

Long-Term Trading

Long-term traders look to profit from the knowledge of the macroeconomic conditions behind forex prices. Investors who trade forex this way may hold an investment for a few years if necessary. Markets have more time to move and long-term traders are looking for larger profits.

Long-term traders are not concerned with daily news. They actually look for news items that shake currencies away from their rightful place. The short-term shock gives the investor a chance to profit from the irregularity in the price.

Forex Trading Example in Brazil

Imagine that the R$/USD is trading at 0.18120/0.18140. You want to buy R$300,000 because you think the price will rise. The margin rate of this currency pair is 3.88%, so you’ll need a total of $2,110.33 cash in your account to control a R$300,000 investment. Trading on margin means that your broker backs the larger percentage of your trade.

The R$/USD price moves up and is trading at 0.18170/0.18190 after 5 hours. That corresponds to a 3-point increase and your final profit is (R$300,000*0.18170) - (R$300,000*0.18140) or $90 on the trade.

Make Money with Forex in Brazil

You can make money in a number of ways in the forex market. Here are a few methods that everyone should know:

• Short selling: short selling means that you want a currency to go down to profit from it
• CFDs: Contracts for differences (CFDs) do not allow you to buy and sell currency. CFDs do track the prices of currencies exactly, however. You make and lose profit in the same way without actually owning the currency.
• Binary options: if you want a simple yes or no choice, the binary option is for you. These options do not follow the price of the currency exactly.

Best Online Forex Brokers in Brazil

Here are some of the forex brokers in Brazil to choose from:

More on Moneta Markets

Moneta Markets offer traders around the world access to 300+ forex pairs, commodities, indices, Share CFDs and Crypto CFDs on their next-gen WebTrader, MT4, and MT5 platforms

Traders can open an account with this leading, regulated FX broker in just minutes, and start trading with a minimum deposit of just $50.

As part of the industry-leading Vantage group of brands, clients can rest assured that they’re trading with a transparent, secure broker, and all client funds are held in segregated accounts with the AA-rated National Australia Bank (NAB).

With three account types on offer, STP, TRUE ECN, and PRIME, traders can access spreads from 0.0 pips across all trading platforms, as well as unlock deposit bonuses, forex trading signals, and more!

Forex Terminology

Here are some basic terms you’ll need to know to trade forex:

• Pip: the smallest basis of movement, equal to $0.0001 in most cases
• Lot size: a standard lot size is 100,000 currency units. You can trade smaller lot sizes. These are known as microlots.
• Orders: how you communicate your trade to the trading platform
• Calls: a contract on a currency. You do not own the currency unless you exercise the contract. Calls also have intrinsic value that you can trade on.

Trade Forex in Brazil

As the largest economy in Latin America, Brazil leads the rest of the region up or down. The fight to control the political landscape in Brazil is bleeding into the financial space, but investing in forex gives the retail trader autonomy that others in the region may not have.