Foreign exchange (forex) trading is one way to make money in Tanzania. You may be able to earn significant returns without burning a hole in your pocket by trading Tanzanian shillings now.
Get Started with Forex in Tanzania
A vast majority of the people in Tanzania earn their livelihoods from the agriculture industry. The Tanzanian shilling (TZS) is their official currency and it is further subdivided into 100 senti.
The Bank of Tanzania was established in 1966 and serves as Tanzania’s central bank. Its primary function is to implement monetary policies and uplift the national economy. The Bank of Tanzania manages the foreign exchange reserve that ensures sufficient capital is preserved, liquidity needs are met and income is enhanced for the people.
Under the Bank of Tanzania Act, 2006, the central bank has the sole right to issue banknotes and coins in the country. The Tanzanian shilling has denominations of 500, 1,000, 2,000, 5,000 and 10,000. Most of these banknotes depict animals and architecture found in Tanzania.
Due to the slow rate of GDP growth in the country, Tanzania relies extensively on financial support from the International Monetary Fund (IMF) to run its operations. It has a national debt of $7.9 billion.
Here’s a step-by-step guide to help you get started with forex trading in Tanzania.
Step 1: Get a digital device with fast internet connectivity.
You can use your desktop, laptop, tablet or smartphone to trade forex. The value of the currency pairs listed on forex brokers frequently fluctuate. Having a personal device to constantly track these changes is essential to successful forex trading.
Step 2: Find an online forex broker.
There are several forex brokers available online. Go through their websites and choose a broker that lets you trade currency pairs with TZS.
Be sure to check the footer of these websites for information on its regulatory bodies. If you can’t find any such information from the Securities Exchange Commission (SEC) the Financial Industry Regulatory Authority (FINRA) or other regulatory bodies, the broker can’t be trusted.
Step 3: Sign up for an account.
You can open a new account with the forex broker on its website. Some forex brokers require a minimum amount of deposit to open an account. These brokers also offer different types of accounts that vary in initial deposit requirements and spread sizes. Choose the one that’s right for you.
Step 4: Transfer funds to your account.
Once you’ve signed up for an account, you need to transfer funds to start trading forex. Depending on the broker you’ve chosen, you can choose your currency and fund your account using several options. Generally, these funding options include wire transfers, debit cards and electronic payment systems such as Paypal and Skrill.
Step 5: Download a forex trading platform.
You need to download the forex trading platform on your computer or smartphone. Take the time to customize the look and feel of the platform to help you get accustomed to forex trading.
Step 6: Begin your forex trading journey.
Before you start trading forex, you might want to open a demo account and trade using virtual money. These demos can help you get used to the interface of the forex broker without conceding unnecessary losses. After you feel confident using the platform, you can start trading forex using real money.
Tanzania Forex Trading Strategies
Forex traders from all over the world rely on a few simple strategies to maximize their profits and minimize losses. You can consider these forex trading strategies to earn better results from your investments.
Global economic news and events can have a strong impact on forex markets. Many traders stay on top of influential financial information to anticipate short-term price movements of forex currency pairs.
You can research inflation rates, trade policies and multinational deals made between countries. You also run the risk of missing the window of opportunity if you’re not fast enough with your trade executions.
Day trading involves closely monitoring intraday price movements of forex currency pairs within a single trading session. These trades can take place anytime during the day and all positions are exited on the same day. Traders have adopted this method to reduce losses from overnight market volatility. Day trading can be very beneficial to short-term traders with limited time.
Scalping is a strategy that involves making several trades throughout the day with low profit margins. The profits earned from minor price movements can add up to a sizable income.
Rapid price movements during intraday trading sessions can cause slippage on your trade executions. These tiny losses can quickly negate your earnings and eat away at your profits. This method of trading requires a lot of time and focus to track price movements. Scalping may not be favorable for traders with a full-time job.
Momentum trading or swing trading are trades that are executed when a forex pair starts to gain momentum in the market. Traders prefer to buy and sell currency pairs during market swings that can occur during the day, week or month. These traders rely on the volatility of the market to make a buck.
This method of trading can be less stressful than day trading or scalping. You can adjust your entry and exit points throughout the week to cut unnecessary losses.
Forex Trading Example in Tanzania
Let’s say the USD/TZS currency pair is currently trading at 2,310. According to that price, it will cost you 2,315 shillings to buy a U.S. dollar. You can choose to buy $100,000 at the rate of 23,10,00,000 shillings. After 2 months, consider the price of USD/TZS has risen from 2,310 to 2,315. You can then sell your $100,000 and earn a profit of 500,000 shillings in just 60 days.
Making Money with Forex in Tanzania
Last year, the Bank of Tanzania tightened its control on forex by issuing new regulations. These new rules were set in response to the government revoking the licenses of 100 bureaus and the forced shut down of a newspaper for using unofficial data on exchange rates.
Because of the reduced number of forex bureaus in Tanzania, investors have turned to commercial banks for trading shillings. Around $10 million was traded in 2019 and that number is expected to grow in 2020. The increased transparency and improved currency inflows have been a driving force behind Tanzanian investors embracing commercial banks for trade.
Best Online Forex Brokers in Tanzania
Online brokers let you trade forex currency pairs with convenience. Online brokers let you trade forex currency pairs with convenience. Forex brokers are equipped with advanced tools and educational resources to help you learn how to trade.
Take a look at these top forex brokers to begin your forex trading journey.
You should be familiar with a few basic forex terms before you start trading. Forex traders use these terms regularly during intraday trading sessions:
- Pip: The smallest unit of price movement is measured in pips. Generally, forex currency pairs are listed up to the 4th decimal point.
- Lot size: The lot size is the standard unit of your trading order. 100,000 units is the standard lot size. You can buy and sell currency pairs in smaller lot sizes as well.
- Orders: An order is a command you execute through the online forex broker to carry out your trade. When you want to buy forex currency pairs, you execute a buy order. When you want to sell forex currency pairs, you execute a sell order.
- Call: A call is a request received from your broker. It’s an indication that 1 or more of your open trades needs additional funding to maintain its position.
Start a Trend by Trading Forex in Tanzania
Affordable smartphones and widely accessible internet have made forex trading a possibility for Tanzanians. Forex trading has provided a robust market to make money but it also comes with a lot of risks. Take your time to analyze the forex market before you start trading forex.
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