Political corruption, divisions and economic mismanagement have contributed to Brazil facing a fundamental threat to its free market principles. The value of the Brazilian real has fallen by more than 14% in 2020 alone. President Bolsonaro, who once boasted of having no knowledge of economics, has only worsened the economic crisis that began in 2014 and continued to collapse in 2020 due to COVID-19. If you plan to trade in this market, you need to know the ins and outs of forex trading in Brazil.
The foreign exchange market has become a way for many Brazilian retail investors to stabilize their financial portfolios and invest outside the country’s economy. Forex investors in Brazil move $20 billion a day, which equates to $5 trillion a year, including futures and spot trades. If you’re interested in forex trading, read on for everything you need to know to get started.
Start with Forex in Brazil
Brazil’s central bank backs measures to modernize the country’s currency rules. A bill aims to expand de facto convertibility by reducing barriers to foreign businesses and updating the decades-old foreign exchange law. Regulation throughout the retail trade is relatively well managed in the country, which protects Brazilians who choose domestic brokers.
The International Financial Services Commission (IFSC), based in Belize, also provides a regulatory structure for many forex brokers marketing in Brazil. These are all advantages for the Brazilian investor. With that in mind, here are the steps you need to take to get started in the forex market in the country:
- 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 any delay in your trade execution.
- Choose the right broker. Your broker is the entity that executes your trades. Choose a reputable broker that is regulated and has good reviews.
- Open an investment account. Once you have your broker, you will go through a process to verify yourself.
- Deposit your account. Bring the first funds to your investment account from your bank account or a debit card. You may have different options depending on the broker you choose.
- Get your trading software. Your broker will usually have a user interface for trading. If you choose a broker that does not do this, there are many standard third-party software packages to choose from.
- Swap. You are ready to trade, although you may want to start with a virtual account (working account with fake money).
Brazil Forex Trading Strategies
Trade forex more successfully in Brazil with these important strategies that every investor should know:
Also known as high-frequency traders or scalpers, day traders benefit from quick and accurate investing. A day trader is in cash at the end of each day and can 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 also use these tools.
If you are going to day trade, you must have the ability to move quickly in the market. Scalpers take profits and losses quickly. The Forex market has less volatility than traditional securities, but it is still there. High frequency traders do not want the market to move significantly in either direction during a trade.
Over days or weeks, a currency can trade in a range or start a trend. A series creates support and resistance levels that provide signals about when to buy and when to sell. Currency trends are directional, and a good investor can profit from an upward or downward movement.
Trend traders are also called medium-term traders. The time they have an investment is usually longer than the day trader.
Long term trade
Long-term traders seek to benefit from knowledge of the macroeconomic conditions behind exchange rates. Investors who trade forex this way can hold an investment for a few years if needed. Markets have more time to move and long-term traders are looking for bigger profits.
Long-term traders are not worried about the daily news. They are actually looking for news articles that push currencies away from their rightful place. The short-term shock gives the investor a chance to take advantage of the price irregularity.
Example of Forex trading in Brazil
Imagine R$/USD trading at 0.18120/0.18140. You want to buy R$300,000 because you think the price will go up. The margin rate for this currency pair is 3.88%, so you need a total of $2,110.33 cash in your account to control an investment of R$300,000. Margin trading means that your broker backs the larger percentage of your trade.
The R$/USD price is rising and trading at 0.18170/0.18190 after 5 hours. This equates to an increase of 3 points 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 several ways in the forex market. Here are some methods that everyone should know:
- Short sale: short selling means you want a currency to go down in order to take profit
- CFDs: Contracts for Differences (CFDs) do not allow you to buy and sell currencies. However, CFDs follow currency prices exactly. You earn and lose profits in the same way without actually owning the currency.
- Binary options: if you want a simple yes or no choice, binary option is for you. These options do not track the price of the currency exactly.
Best online forex brokers in Brazil
Here are some of the forex brokers in Brazil to choose from:
eToro USA LLC; Investments are subject to market risk, including possible loss of principal.
AUD$200 or equivalent
Learn more about Moneta Markets
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Here are some basic terms you need to know to trade forex:
- Frog: the minimum base move, equal to $0.0001 in most cases
- Lot size: a standard lot size is 100,000 currency units. You can trade with smaller lots. These are known as microlots.
- Order: % s: how you communicate your transaction to the trading platform
- Call: a currency contract. You do not own the currency unless you exercise the contract. Calls also have an inherent value that you can trade on.
Trading Forex in Brazil
As the largest economy in Latin America, Brazil leads the rest of the region up or down. The battle to control the political landscape in Brazil bleeds into the financial space, but investing in forex gives the retailer an autonomy that others in the region may not have.
Is it legal to trade forex in Brazil?
It is legal to trade forex in Brazil.
Is it safe to trade forex in Brazil?
As long as you use a licensed forex broker, you can safely trade forex in Brazil.
How can I find a licensed forex broker in Brazil?
You can find a licensed forex broker in Brazil by checking the list above.
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