The allure of the US stock markets excites traders from around the globe, including those in Zimbabwe eager to tap into one of the financial world’s most dynamic arenas.
For Zimbabwean traders, the journey to trading on Wall Street involves more than just ambition; it requires a strategic approach to education, market understanding, and risk management.
This article aims to serve as a comprehensive guide, detailing the steps and strategies necessary for a Zimbabwean trader to successfully navigate and potentially thrive in the US stock markets.
Here’s how you can begin your journey into trading one of the world’s largest and most influential financial markets.
Understanding US stock markets
The United States is home to several major stock exchanges where companies list their shares:
- i) New York Stock Exchange (NYSE): Known for blue-chip companies like ExxonMobil, IBM, and JPMorgan Chase.
- ii) NASDAQ: Famous for tech stocks like Apple, Amazon, and Google’s parent company Alphabet.
These markets are regulated by the Securities and Exchange Commission (SEC), ensuring transparency and fairness, which can provide a sense of security for international traders.
Preparation: your gateway to trading
- a) Education:
- i) Technical and fundamental Analysis: Start your day with a robust trading plan, as I do. Use technical analysis for market timing, employing tools like Moving Averages, RSI, or MACD to identify trends.
Fundamental analysis involves evaluating a company’s financial health through metrics like P/E ratio, revenue growth, and debt levels. I have developed a course that is available on my website at www.streetwiseeconomics.com where I go in denial of how I trade profitably.
- ii) Brokerage Account: You’ll need to open an account with a brokerage firm that allows international accounts.
A brokerage account is just a vehicle within which you can trade or buy shares for investments. Some popular options include: Fidelity International Trading which offers access to global markets with user-friendly tools. You might need to provide proof of identity and address, and comply with KYC (Know Your Customer) regulations.
In my case, even though I am a Canadian-Zimbabwean, some brokers have refused to open brokerages for me on account of my Zimbabwean heritage which I don’t regret.
There are lots of options out there and you just have to shop around and find what’s suitable for your needs. I use Questrade for my trading and investing purposes. You can contact me if you want some referral codes to open an account which comes with some rebate of $50 when you open the account.
iii) Funding Your Account: Transfer funds from a Zimbabwean bank account or your international bank account, possibly through wire transfer or via a service like Wise (formerly TransferWise) to minimise fees.
Remember, currency conversion might apply and can significantly reduce your profitability through these exchange rate conversion fees..
Trading strategies: day trading vs. swing trading
Day Trading: Involves buying and selling stocks within the same trading day. For example, if I notice a stock like Tesla (TSLA) showing a bullish pattern in the early morning, I might enter a position aiming for a profit by the close. Notice that, statistically, less than 10% of traders in the US are profitable and you need to approach it with some humility and understanding that it’s not a get rich quick scheme. Personally, I have invested in online courses, and spend a lot of time reading and researching about the stock market and still, consistent profitability is not guaranteed!
- i) Pros: Quick profits, no overnight risk if you get your trades right.
- ii) Cons: High risk due to market volatility, requires constant monitoring.
Swing Trading: Here, I might hold stocks for several days or weeks, like when I bought shares in Estee Lauder Companies Inc (EL) a few days ago and sold for a profit in a few days. Note that, I do a deep analysis as I share in my trading course on my website, I don’t just jump in and out of securities that I don’t understand. It’s too risky.
- i) Pros: Less time-intensive, can capitalise on medium-term trends.
- ii) Cons: Requires patience, and there’s exposure to overnight market risks.
4) Risks and opportunities
Risks:
- i) Market volatility: Prices can fluctuate wildly, especially in tech stocks.
- ii) Currency risk: The exchange rate between USD and ZWL could affect your returns.
iii) Regulatory changes: Sudden shifts in U.S. policy could impact market conditions.
Opportunities:
- i) Diversification: Access to sectors not available in Zimbabwe, like tech or pharmaceuticals. The US has some of the top performing businesses globally by market capitalisation.
- ii) Liquidity:US markets are highly liquid, allowing for easier entry and exit from positions.
iii) Growth potential:Trading in growing US companies can lead to significant returns if you manage your risks so well.
5) Becoming a profitable trader
Risk management: Never risk more than you can afford to lose. Use stop-loss orders to cap potential losses.
Continuous Learning: Stay updated with market news, use trading simulators to practice without risk, and learn from each trade.
Discipline: Stick to your trading plan. Emotional trading often leads to losses.
Leverage rechnology: Utilise trading apps and platforms for real-time data and analysis, which can give you an edge over less tech-savvy traders.
Embarking on trading in the US markets from Zimbabwe is a venture filled with potential but not without its challenges.
The process begins with thorough education, setting up the necessary trading accounts, and understanding different trading strategies like day trading and swing trading.
While the markets offer vast opportunities for growth and diversification, they also come with inherent risks such as market volatility and currency fluctuations.
The key to becoming a successful trader lies in disciplined risk management, continuous learning, and leveraging technology for better market insights.
By adopting these practices, Zimbabwean traders can not only access but also aim to excel in the expansive world of US stock trading. Remember, the path to profitability in trading is paved with knowledge, strategy, and an unwavering commitment to disciplined execution.
If you want to learn more about how to trade profitably in the US markets, I encourage you to contact me via my website at www.streetwiseeconomics or email below.
Till next time, trade and invest wisely and may the markets be on your side!
*Isaac Jonas is a Canadian based economist and consultant at Streetwise Economics. He is also a retail investor and retail trader, focusing mainly on the US and Canadian capital markets. He regularly shares insights via his social media handles. His website is www.streetwiseeconomics.com and can be reachable on isacjonasi@gmail.com. Insights shared in this article do not amount to investment advice.