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Many people in Zimbabwe trade Forex, commodities, and stocks using CFDs. Many operators who trade CFDs will allow the trader to use leverage at a rate as high as 1:1000. This means that traders can make significant gains or losses with a relatively small investment. Contracts for difference (CFDs) are derivative product that allows traders to speculate on the price movements of assets without owning the underlying asset. CFD trading is becoming increasingly popular as it offers many advantages over traditional stock trading. This blog post will discuss all you need to know about trading CFD in Zimbabwe.

What are contracts for difference?

Zimbabwean traders can use contracts for difference (CFDs) to speculate on asset price movements. Zimbabweans trading in CFDs (contracts for difference) can pick whether to go long (anticipate that the asset price will increase) or short (believe that the asset price will decrease).

One advantage of CFD trading is that it offers traders flexibility in going long or short on an asset – meaning they can make profits whether prices rise or fall. CFDs have lower costs than traditional stock trading as there are no brokerage fees or stamp duties.

Is trading legal in Zimbabwe?

CFD trading is legal in Zimbabwe, and with a population of around 14.86 million, there is huge potential for traders in the country. Five main agencies in Zimbabwe are responsible for regulating and overseeing the country’s finances:

• The Reserve Bank of Zimbabwe (RBZ) 
• The Ministry of Finance 
• The Deposit Protection Corporation 
• The Securities Exchange Commission (SEC) 
• The Insurance and Pensions commission

The top exports of Zimbabwe are Minerals, Gold, and Agriculture. Tourism is also a significant contributor. In addition to typical forex trading, Islamic forex trading is also available and legal in the country. A minority religion in Zimbabwe, Islam is followed by less than 1% of the population. Muslim investors living in the country where Sharia Law is practised must find a Forex Broker that offers both standard and Islamic forex trading accounts.

Why trade CFDs?

You may wonder why traders choose not to own any financial markets when they open positions. CFDs boast some features and benefits you would be hard-pressed to find when investing.

There are three primary features of CFDs that we will explore.

1. Going short

A CFD is a contract in which your provider agrees to pay you the difference between a trade’s entry and exit prices. 

When you open your position, you can choose if you want to make money from an increase in market value (going long) or a decrease (shorting).

• If you want to go long, you need to buy a CFD. This will only be profitable if the market has risen by the time you’re ready to close your position.
• If you want to go short, you need to sell CFDs. You’ll profit if you close your position when the market has fallen.

For example, pretend oil prices are about to drop because of global economic frailty. With contracts for difference, you could make money from a bear market by selling Brent crude CFDs. 

When Brent crude’s price falls, you can close your position and take the money from the decline in its value. However, if the cost of oil increases, you would make a loss instead.

2. Margin

You don’t need to pay the full value of a CFD when you open a position. Instead of paying for the entire trade upfront, you put down a deposit (called margin), which might be 5% or 10% of the position’s cost. You’re not purchasing the basic item when you trade derivatively; you’re just a Stakeholder in its price variances.

Leveraged trading is when you trade with borrowed money, and the deposit you have to pay is your margin.

With leverage, you have greater control over how to use your money. By only having to put down £10,000 of the total £50,000 Rio Tinto CFDs you wanted to trade, this allows you not to tie up all your available funds in a single position.

Your profit or loss would be based on the full £50,000. In other words, though high leverage can work well, you should be cautious and always mindful of your risk management.

3. Range of markets

The good news is that you won’t have restrictions on what you can purchase or sell since you never own the assets. You can speculate on nearly any financial market by going long or short with a CFD.

Providing you with a choice can also be beneficial for coming up with new ideas. You can effectively lower your risk by trading markets in different asset classes and regions.

The trading market in Zimbabwe

Cryptocurrency

While cryptocurrency markets have been around for a while in Zimbabwe, their availability is still subject to local financial regulation. Cryptocurrencies are not as susceptible to interest rates and political instability because they are decentralized. For example, in Zimbabwe, cryptocurrencies are much more stable than the currency markets.

The young population in Zimbabwe is growing, and their income levels are increasing, leading to a wider adaptation to online technology. As a result, cryptocurrency trading volume is greatly increasing in Zimbabwe.

Commodity trading

Zimbabwean commodity trading covers the buying and selling precious metals, energies and agricultural commodities.

Since 2002, some items, such as metals, have experienced exponential growth in Zimbabwe.

Over the last three decades, countries like China and India have experienced exponential growth. Countries with large populations, such as China and India, greatly demand essential commodities and materials. For instance, growing crops to feed people and metalworking to build infrastructure. This means countries like Zimbabwe can take advantage of this demand.

Forex trading

Forex trading popularity is on the rise in Zimbabwe. Data indicates a continuous year-by-year increase in Forex volume traded over the last five years.

USD 5.1 trillion is traded globally every day, dwarfing other financial markets.

The Zimbabwe economy has improved due to the advent of online technology, higher internet coverage and competition among brokerages.

Conclusion

If you’re looking to take advantage of growing markets in Zimbabwe, then CFDs and cryptocurrency trading are two popular choices. With a range of markets available for trading, you can develop innovative ideas that help you capitalize on market fluctuations. However, it is important to stay informed about your risk management strategy and carefully consider all the factors that may affect your trades.​