How to Start Forex Trading in Colombia

With the growing popularity of online trading, it's easier than ever to get started in the foreign exchange market in Colombia. However, it's important to understand the basics and take the necessary steps to ensure your success.

Forex trading has become a popular investment option for individuals looking to diversify their portfolios and potentially earn profits from currency fluctuations. Colombia, with its growing economy and increasing access to online trading platforms, has seen a rise in forex trading activity among its residents.

In this article, Benzinga will provide you with a comprehensive guide on how to start forex trading in Colombia. From setting up a trading account to understanding key trading concepts, you'll get a walk through of the essential steps to help you embark on your forex trading journey with confidence.

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Disclosure: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Getting Started with Forex in Colombia

You can trade forex reliably in Colombia through the following steps:

• 1. Start with a strong internet connection: Ideally, your internet connection should be latency-free with an industry-standard uptime guarantee. The forex broker, trading platform and strategies you use all depend on the veracity of your connection to the web.
• 2. Get a regulated forex broker: Most Colombian forex traders use offshore brokers. This doesn’t mean you have to give up protection. The best forex brokers will be regulated through institutions from that country.
• 3. Connect your bank: After you pick a broker, you will connect your bank account or payment card to and personal information to your investment account.
• 4. Fund the investment account: Once you connect your payment method, you will fund your investment account through it. Make sure that you check reviews about how your broker handles your money.
• 5. Pick out a trading platform: Choose from an industry standard platform or a proprietary platform from your broker. Some popular trading platforms include MetaTrader 4, MetaTrader 5 and cTrader.
• 6. Begin making trades: You have set up your interface. You can immediately start investing in the forex market.

Attribution: Pikist

Colombia Forex Trading Strategies

Now that you know how to trade forex, you can begin to trade more efficiently through the right strategy. Here are a few important ideas that you can use to create an individual investment style that works.

Short-Term Trading

Short-term trading is also known as high-frequency investing. The profits are smaller, so investors make up for time by increasing the frequency of trades. Sophisticated investors may even use automated bots or systems to help. Don’t think you can rely completely on AI, however. Even the best bots can only invest with the appropriate input. You also need to be extremely focused to catch the short windows of opportunity that the market gives you.

Mid-Term Trading

If you are interested in the directional movement of currencies, you may want to consider mid-term trading. Investors who use this methodology may hold a currency for a few days to a few weeks. Trade management becomes important because the time frame gives the investment an opportunity for sudden and unexpected movements. Successful traders understand how short-term news events affect price action, although they are not emotionally moved when something unexpected happens.

Long-Term Trading

Short-term news events mean much less over the long term. If you do not care to deal with trading bots and overly emotional investment cycles, you can scale out and focus on long-term trading. The long-term forex investor is not concerned about the short-term movements of a currency whatsoever. Positional traders, as they are also called, are much more concerned with currencies whose price does not reflect their value. The market eventually corrects itself and you can profit from these corrections.

Forex Trading Example in Colombia

COP/USD is trading at 0.00028/0.00030. You want to buy COP500,000 and sell when the price goes up. The currency pair has a margin rate of 3.44%. You will need $4.82 cash in your account to control COP500,000 with these terms. 

The COP/USD moves up over time and is trading at 0.00035/0.00037 after 5 hours of market activity. This is a 0.5 point increase, and your final profit is $25:

(COP500,000 x 0.00035) – (COP500,000 x 0.00030).

***This is a simplified example, forex trading involves significant risk and it's essential to have a solid understanding of the market before engaging in trading activities.

Trading Forex in Colombia

Attribution: Forex Colombia News

There are many financial vehicles you can use to profit from the forex market. Here are just a few of the most important:

• Short selling: You can profit from a fall in the price of a currency through short selling. You will need a margin account because you will borrow money to sell a currency first, then buy it back later.
• CFDs: Contract for differences (CFDs) are special tools that brokers use to get around certain regulations. If you use CFDs, you are basically trading the currency although you never own it.
• Binary options: Unlike CFDs, binary options do not follow the price action of currencies directly. They are contracts that pay off well if a certain condition is met. If that condition is not met, you lose a large percentage of your investment.

Best Online Forex Brokers in Colombia

There are many offshore forex brokers that you can use to trade forex in Colombia.

Forex Terminology

As you invest in forex, you will run into these terms at every turn:

• Pip: The forex market’s smallest unit, corresponding to $0.0001
• Lot size: The amount of currency you buy or sell
• Orders: The order describes to your broker exactly how you will enter or exit the market
• Calls: A contract between 2 parties to exchange a certain amount of currency at a certain price on a certain date

Understanding Forex Trading in Colombia

The Colombian government has reduced its direct control of foreign exchange trade in recent years, making it easier for brokers to move currency. The overall financial landscape is still quite tightly managed. The Colombian Central Bank, the Superintendence of Companies and the Colombian Tax Authority form the regulatory triumvirate in the country. Retail forex traders feel their presence in the lack of domestic forex platforms across Latin America, but South America is changing. The financial market is shifting for the individual trader, currency prices are always shifting and the new spot market in Colombia is quite enticing.

Regardless, many offshore forex brokers do business in Colombia with foreign currency and the base currency. You can find brokers regulated through the U.K., U.S., Belize, Cyprus, the UAE and South Africa. Colombia maintains a relatively stable financial system that gives Colombians a level of investor protection that many South American countries do not have. Therefore, it can be fruitful to invest against the British Pound, the US Dollar, etc.

Start Trading the Currency Market in Colombia

Although Colombia’s financial structure is slowly becoming more progressive, there is still much that needs to be done. The country is building a stable regulatory environment, but it has yet to really foster a domestic industry. Fortunately, there are many offshore institutions who want to connect to the rising market of the country.

Frequently Asked Questions