Political corruption, divisiveness and financial mismanagement have contributed to Brazil facing a fundamental threat to its free market principles. The value of the Brazilian real has declined more than 14% in 2020 alone. President Bolsonaro, who once boasted that he had no knowledge of economics, seemed only to exacerbate the economic crisis that began in 2014 and expanded in 2020 due to COVID-19.
The forex market has emerged as a way for many Brazilian retail investors to stabilize their financial portfolio and invest outside of the country’s economy. Forex investors in Brazil move $20 billion on a daily basis, which translates to $5 trillion annually including futures and spot trading. If you are interested in forex trading, read on for everything you need to know to get started.
Get Started with Forex in Brazil
The Brazilian central bank is supporting measures to modernize the country’s forex regulations. A bill currently in process aims to extend the real’s convertibility by reducing barriers to foreign business and update decades old forex law. Regulation on the retail scale is managed relatively well within the country, protecting Brazilians who choose domestic brokers.
The Belize-based International Financial Services Commission (IFSC) also provides regulatory structure to many forex brokers marketed in Brazil. These are all advantages to the Brazilian investor. With that in mind, here are the steps to follow 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 latency in your trade execution.
- Pick the right broker. Your broker is the entity that executes your transactions. Choose a reputable broker that is regulated and has good reviews.
- Open an investment account. Once you have your broker, you’ll go through a process to verify yourself.
- Fund your account. Bring in the initial funds for 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 trade. If you choose a broker that doesn’t, you can choose from many 3rd party standard software packages.
- Trade. You are ready to trade, although you may want to start with a virtual account (working account that uses fake money).
Brazil Forex Trading Strategies
Trade forex more successfully in Brazil with these important strategies that every investor should know:
Attribution: Global Press Journal
Also known as high frequency traders or scalpers, day traders profit from investing quickly and precisely. A day trader is in all cash at the end of each day and may 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 use these tools as well.
If you are going to day trade, you need to have the ability to move quickly within the market. Scalpers take profits and losses quickly. The forex market has less volatility than traditional securities, but it’s still there. High frequency traders don’t want the market to move in a significant way in either direction during a trade.
Over the course of days or weeks, a currency may trade within a range or begin a trend. A range creates support and resistance levels that give signals when to buy and sell. Currency trends are directional and a good investor can profit from an up or down movement.
Trend traders are also called mid-term traders. The length of time they hold an investment is usually longer than the day trader.
Long-term traders look to profit from knowledge of the macroeconomic conditions behind forex prices. Investors who trade forex this way may hold an investment for a few years if necessary. Markets have more time to move and long-term traders are looking for larger profits.
Long-term traders are not concerned with daily news. They actually look for news items that shake currencies away from their rightful place. The short-term shock gives the investor a chance to profit from the irregularity in the price.
Forex Trading Example in Brazil
R$/USD is trading at 0.18120/0.18140. You want to buy R$300,000 because you think the price will rise. The margin rate of this currency pair is 3.88%, so you’ll need a total of $2,110.33 cash in your account to control a R$300,000 investment. Trading on margin means that your broker backs the larger percentage of your trade.
The R$/USD price moves up and is trading at 0.18170/0.18190 after 5 hours. That corresponds to a 3 point increase 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 a number of ways in the forex market. Here are a few methods that everyone should know:
- Short selling: short selling means that you want a currency to go down to profit from it
- CFDs: contract for differences (CFDs) do not allow you to buy and sell currency. CFDs do track the prices of currencies exactly, however. You make and lose profit in the same way without actually owning the currency.
- Binary options: if you want a simple yes or no choice, the binary option is for you. These options do not follow the price of the currency exactly.
Best Online Forex Brokers in Brazil
Here are some of the forex brokers in Brazil to choose from:
100 of your selected base currency
1 Minute Review
FOREX.com is a one-stop-shop for forex traders. With a massive range of tradable currencies, low account minimums and an impressive trading platform, FOREX.com is an excellent choice for brokers searching for a home base for their currency trading. New traders and seasoned veterans alike will love FOREX.com’s extensive education and research center that provides free, informative forex trading courses at multiple skill levels. While FOREX.com is impressive, remember that it isn’t a standard broker. You can’t invest in the stock or bond market through your FOREX.com and you cannot open an account with tax advantages. The confusing pricing and margin structures may also be overwhelming for new forex traders.
- MetaTrader 4 users
- Beginner forex traders
- Active forex traders
- Impressive, easy-to-navigate platform
- Wide range of education and research tools
- Access to over 80 currencies to buy and sell
- Leverage available up to 50:1
- Cannot buy and sell other securities (like stocks and bonds)
- Confusing margin requirements that vary by currency
- Limited customer support options
- Cannot open an IRA or other retirement account
1 Minute Review
A fully regulated broker with a presence in Europe, South Africa, the Middle East, British Virgin Islands, Australia and Japan, Avatrade deals with mainly forex and CFDs on stocks, commodities, indexes, forex, cryptocurrencies, etc. This brokerage is headquartered in Dublin, Ireland and began offering its services in 2006. It offers multiple trading platforms and earns mainly through spreads.
- Advanced traders
- Traders looking for a well-diversified portfolio
- Controlled by regulatory agencies of multiple countries
- Choice offered in terms of trading platforms
- Support available in 14 languages and trading platforms in 20 languages
- Practice/demo account available for trying out
- Breadth of trading assets
- Does not accept customers from the U.S. as it isn’t regulated in the U.S.
- Transferring funds to the account may take up to five days; withdrawals could take up to 10 days
1 Minute Review
Though Australian and British traders might know eToro for its easy stock and mobile trading, the broker is now expanding into the United States with cryptocurrency trading. U.S. traders can begin buying and selling both major cryptocurrencies (like Bitcoin and Ethereum) as well as smaller names (like Tron Coin and Stellar Lumens).
eToro offers traders the opportunity to invest their assets into premade portfolios or cryptocurrencies, similar to services offered by robo-advisors through traditional brokers. Though eToro isn’t a one-stop-shop for everything an investor needs, its easy-to-use platform and low spreads is a great way to enter the cryptocurrency market.
- International Forex/CFD Traders
- New cryptocurrency traders looking for an easy-to-use platform
- Traders who want to buy and sell cryptocurrencies on-the-go
- Simple platform that is easy to master
- CopyTrader feature that allows new traders to copy the same strategies used by professionals
- Virtual dummy account that gives you $100,000 to practice trades
- U.S. traders currently limited to cryptocurrencies
- Only 15 major coins available to trade
$0.02 per share
1 Minute Review
Pepperstone is an Australian broker focused on providing international forex, CFD and cryptocurrency trading. Though U.S. traders currently cannot open an account with Pepperstone, the broker remains an affordable and comprehensive option for international traders.
Pepperstone offers traders access to over 61 forex markets, over 60 CFDs for index funds and stocks and 5 cryptocurrencies. Leverage options with Pepperstone are extensive; you may qualify for up to 500:1 leverage when trading currencies and up to 5:1 leverage when trading cryptocurrencies, for example.
There are a few areas where Pepperstone can afford to improve. We’d love to see Pepperstone add its own trading platform in the future instead of relying entirely on 3rd-party platforms. We’d also love to see direct stock and fund purchase options in the future. Despite these flaws, Pepperstone remains a very strong choice for international traders.
- International traders interested in trading CFDs from foreign markets and currencies
- Traders who are already familiar with the MetaTrader or cTrader platforms
- Traders who are looking for leverage when trading cryptocurrencies
- Access to over 61 forex pairs and over 60 stock CFDs
- Leverage available for both forex and cryptocurrency trading
- Wide range of educational tools and courses that both beginners and experts can use
- 24/7 customer service
- Not currently available to U.S. traders
- No option to purchase stocks, bonds or mutual funds directly; only CFDs are available
Here are some basic terms you’ll need to know to trade forex:
- Pip: the smallest basis of movement, equal to $0.0001 in most cases
- Lot size: a standard lot size is 100,000 currency units. You can trade smaller lot sizes. These are known as microlots.
- Orders: how you communicate your trade to the trading platform
- Calls: a contract on a currency. You do not own the currency unless you exercise the contract. Calls also have intrinsic value that you can trade on.
Trade Forex in Brazil
As the largest economy in Latin America, Brazil leads the rest of the region up or down. The fight to control the political landscape in Brazil is bleeding into the financial space, but investing in forex gives the retail trader autonomy that others in the region may not have.
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