Traders in Barbados are able to engage in the online foreign exchange (forex) market to speculate on exchange rate movements. If you reside in Barbados and are new to forex trading, here’s how you can get involved in trading currency pairs.
Get Started with Forex in Barbados
The Central Bank of Barbados was established in 1972. As part of its plans for economic development, the Barbados dollar (BBD) was introduced in 1973 to be used in place of the Eastern Caribbean dollar in Barbados. The Central Bank of Barbados has the sole authority to issue Barbados dollars. The banknotes of Barbadian dollars have denominations of 2, 5, 10, 20, 50 and 100. A Barbadian dollar is divided into 100 cents.
The Barbados dollar notes were redesigned in 2013. The new series of banknotes featured imprints of outstanding Barbadians and major security measures to curb the counterfeiting of the national currency.
The cultivation of cash crops such as sugarcane, yam, sweet potatoes and corn are prevalent in Barbados. Apart from agriculture, tourism and financial services also generate sizable revenue for the Caribbean country. There are more than 45 offshore banks, 242 insurance companies and 3,065 international business companies operating in Barbados.
Here’s a step-by-step guide to help you get started with forex trading in Barbados.
Step 1: Get a digital device with fast internet connectivity.
You can use your desktop, laptop, tablet or smartphone to trade forex. The exchange rates of the currency pairs listed at online brokers frequently fluctuate. Having a personal device to track these changes whenever necessary and adjust positions is very helpful 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 the currency pairs you are most interested in speculating on.
Be sure to check the footer of its website for information on their regulatory status. If you can’t find any such information from reputable regulators like the U.S. Securities Exchange Commission (SEC), the UK’s Financial Conduct Authority (FCA) or another strict regulatory agency, the broker probably can’t be trusted.
Step 3: Sign up for an account.
You can open a new account with the forex broker on its website. Most online forex brokers require a minimum deposit amount to open an account. Most brokers also offer different kinds of accounts based on your initial deposit amount, desired benefits and other trading requirements. 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 accounting currency and fund your account using several options. Generally, these funding options include bank wire transfers, ewallet transfers and debit cards.
Step 5: Download a forex trading platform.
You may need to download a forex trading platform on your computer or smartphone that your broker supports. Take the time to customize the look and feel of the platform to help you trade more efficiently.
Step 6: Begin your forex trading journey.
Before you start trading forex, you might want to open a demo account funded with virtual money. These practice accounts can help you get used to the interface of the forex broker without the risk of losing money. After you feel confident using the platform and your trading strategy, you can start trading forex using real money in a live account.
Barbados Forex Trading Strategies
Many forex traders from all over the world rely on a few basic trading strategy types to maximize their profits and minimize losses. You can check out these common forex trading strategies to help achieve better results when trading.
Day trading involves closely monitoring intraday exchange rate movements of forex currency pairs as you open and close out all positions within a single trading session. These day trades can take place anytime during the day and will be closed out on the same day. Traders have adopted this method to reduce the chance of losses from overnight market volatility when they cannot watch the market.
You can adjust your day trading positions a couple of times over the day based on market movements and as your market views change. Day trading can be time-consuming, so make sure you have the spare time required to commit to a particular day trading strategy.
Global economic news and events can have a strong impact on relevant currency pairs quoted in the forex market. Many traders stay on top of influential financial information to anticipate the short-term exchange rate movements of forex currency pairs.
You can research relative inflation and interest rates, monetary policy and multinational trade deals made between countries. News trading often involves quick and appropriate reactions to new information to make a profit and low stop-loss order slippage at your broker to help limit losses. You run the risk of missing the window of opportunity if you’re not fast enough with your trade executions.
Scalping is a very short-term trading strategy that typically involves making numerous quick trades throughout the day aiming to capture small profits while taking even smaller losses. The accumulated profits earned scalping currency pairs can add up to a sizable income for quick traders.
Rapid exchange rate movements during daily trading sessions can cause slippage on your stop-loss trade executions. These losses can quickly eat away at your profits, so it makes sense to choose a broker that offers no order slippage if possible. This method of trading requires a lot of time and focus to be successful, so scalping will probably not be suitable for traders with another full-time job.
Momentum trading or swing trading is a short- to medium-term trading strategy that can involve taking overnight positions and tends to profit from market volatility. Swing traders typically trade along with the prevailing trend but also watch momentum indicators for market reversal signals so that they can also profit from corrections.
This method of trading can be less stressful than day trading or scalping, although taking overnight positions does involve extra risks. You can adjust your positions throughout the week to take profits and cut losses.
Forex Trading Example in Barbados
The long-standing peg of the Barbadian or Bajan dollar to the U.S. dollar makes the USD/BBD an unusually stable forex currency pair. Most traders will therefore want to operate in other currency pairs that exhibit greater exchange rate volatility.
As an example, let’s say that the USD/BBD forex currency pair is trading at 1.9919. It will cost you 1.9919 Barbadian dollars to buy 1 U.S. dollar, so you can buy $100,000 for 199,190 Barbadian dollars. You can also take a $100,000 position in USD/BDD in your margin account if your forex broker allows you to trade that currency pair.
Assuming a leverage ratio of 30:1, that means you would need to have at least $3,333.33 in your broker account as margin to initiate that position. After 1 month, the price of the USD/BBD currency pair might have risen to 1.9981.
At that time, you can sell out your $100,000 position in USD/BBD to realize a profit of 620 Barbadian dollars over that time frame. Alternatively, if the USD/BBD exchange rate instead fell to 1.9880, you would have lost 390 Barbadian dollars.
Making Money with Forex in Barbados
When the Barbadian dollar was newly launched in 1973, 2 Barbadian dollars equaled 1 U.S. dollar. In almost 50 years, the Barbados dollar has maintained that value with minimal changes. This aspect of the native Barbadian currency has prompted some forex traders to trade the well-established range around that pegged value if they have access to the Interbank market or can actually find an online broker that will let them operate in the USD/BBD pair.
Over the past year, the USD/BBD currency pair has hit a 52-week high of 2.0421 and a 52-week low of 1.9800. These relatively small exchange rate movements can present a range trading opportunity for residents of Barbados, although most Barbadians will probably want to trade other more liquid currency pairs that exhibit greater volatility.
Best Online Forex Brokers that Accept Clients from Barbados
You will probably need an online broker to start your forex trading journey. These brokers support trading platforms with advanced tools to help you browse through, chart and trade numerous forex currency pairs. You can also find tons of educational resources and daily financial news from around the globe to improve your forex trading knowledge on many brokers’ websites.
Take a look at some of the best forex brokers that will take clients from Barbados in the table below.
You should be familiar with a few basic forex terms before you start trading. Many forex traders use these terms regularly.
Pip: The smallest exchange rate movement in a particular currency pair. In most cases, a single forex currency pip change will be in the 4th decimal place or 0.0001. For instance, if the USD/BBD exchange rate rose from 1.9981 to 1.9982, it is considered a movement of 1 pip.
Lot size: This is a standardized trading amount; 100,000 base currency units are the standard lot size at most online forex brokers. You can also transact currency pairs in smaller micro and mini-lot sizes at some brokers.
Orders: An order is a command given to your online forex broker to execute a trade for you in the market. When you want to buy or go long a forex currency pair, you place an order to buy the base currency and sell the counter currency. When you want to sell or go short on a forex currency pair, you execute an order to sell the base currency and buy the counter currency in your desired amount.
Margin calls: A notification from your broker to deposit more margin in your trading account. Instead of issuing a margin call, most online forex brokers will instead automatically close out your open positions if the margin required to hold them exceeds your trading account’s balance. Keep an eye on your account balance and required margin when trading to make sure this does not happen.
Trade from Barbados Today
Islands in the Caribbean such as Barbados have limited job opportunities. Due to a shortage of employment options, Barbadians who feel comfortable taking financial risks can explore trading forex as a way to possibly generate more money from their risk capital. Moreover, the Barbados government stated in 2019 that it had increased the amount of foreign currency that residents can hold in bank accounts to $10,000 in 2019 and that it aims to pursue a policy of gradually relaxing exchange controls. This may help residents of Barbados trade BBD, although most online forex traders will want to operate in the major currency pairs instead because of its greater liquidity.
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