Making the Most Out of a Volatile Rand

Back in February 2019, the Rand was – once again – crowned the world’s most volatile currency. It’s not a title desired by most South Africans, of course, but it is sometimes a reality of an emerging economy that the currency will be volatile, especially when the President of the United States can send a currency tumbling with a tweet.

However, one shouldn’t always confuse volatility with unpredictability. They are certainly related conceptually, but there is a marked difference between knowing that a currency will be volatile and sudden, unexpected movements in forex pairs.


 

One could argue that the Rand will fall into the former of those categories, predictable volatility. After all, the South African Reserve Bank (SARB) did indicate at the end of 2018 that the Rand would remain volatile throughout the early part of 2019. Indeed, Bloomberg also wasn’t far off in its forecasts that the Dollar would average R14.50 across the last quarter of 2018 through the third quarter of 2019.

South Africans have factored the volatility of the Rand into their daily lives.  But this kind of predicable volatility can also be harnessed by investors looking to make a profit in the short term. Fintech has made all types of trading – stocks, commodities, bonds – accessible to those who would not have been able to invest before, but it has especially opened up the multi-trillion-dollar global forex trade.

Fintech opens trading to wider pool of South Africans

Forex trading is multi-faceted, and it does not have to rely on buying a currency and sitting back waiting for it to rise. Indeed, even forex brokers will have different angles and specialities, so it is important to choose the type for you, i.e. the one that fits with your investing goals and strategies.

If you choose to trade the Rand, you can use fintech platforms to access different pairings and start trading. The technology means that you do not need to do this blindly, of course. The best fintech platforms will offer options for copy trading and automated trading options. In short, you can implement the advice of experts by mimicking their investments.

Volatility does, however, imply some risk, and it’s not as if every financial institution has got it correct on the Rand in recent years. The point is that the options are now there for small investors to profit from combining local knowledge and free online expertise.

Social trading is permeating countries around the world, and millions of people are benefiting from low-cost access to financial products. It doesn’t mean your trading is guaranteed to succeed, but it does level the playing field between the average person with a small amount of money to invest and traditional investors who once held the keys to all financial markets. It’s about access, not guaranteed success.

Those profits are not dependent on the Rand going up against other currencies. Yes, shorting – predicting that a stock or currency will drop in value – is sometimes seen as a dirty word, as if it is somehow unpatriotic to bet that your local currency will go down. But it’s also a misunderstood concept, one that has been sullied perhaps unfairly after the exposing of bankers’ practices during the global financial crisis of 2007/08.

Moreover, options for daily forex trading on volatility of a currency are not the same as putting money on the long-term decline of a currency.

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