This archive report was first published on 7 May 2020.
Forex Trading in Kenya: Essential Tips for Retail Traders ¶
Published on May 7, 2020
Forex trading is popular among traders and investors worldwide, with the currency markets open 24 hours a day and a large volume of trades leading to higher liquidity. In recent years, the demand for forex trading has been growing in Kenya, with over 70,000 traders participating in the sector.
One of the reasons for the growth in popularity of forex trading in Kenya is that the Capital Markets Authority (CMA) has started regulating the sector since 2018. Even though the sector is regulated, it carries a high amount of risk. Therefore, first-time traders should be wary of the pitfalls associated with forex trading.
According to local website Trade Forex Kenya, 'Traders need to educate themselves on the basics of the Forex market and learn safe trading practices like risk management before actually investing in forex.'
Here are some essential tips for retail forex traders in Kenya:
- Educate yourself before trading: It is critical to know your way around forex trading before you start investing real money. You should start by finding out the basics such as how to make forex trades, how to manage your risk, what are the active trading times, what do the common forex trading terms mean, how to conduct market research, what makes the currency market fluctuate, and so on.
- Only trade with CMA-regulated brokers: A forex broker carries out your trades in the forex market and holds your money in its account to allow you trade. Not all forex brokers are regulated, and it is important to only trade with regulated brokers. In Kenya, there are only three forex brokers that are regulated by the CMA, namely Pepperstone Kenya, EGM Securities (FXPesa), and Scope Markets (SCFM Limited).
- Compare trading costs: Different forex brokers charge different fees. The overall cost that you would incur when trading with any broker will be different. Before you choose a broker to trade with, you need to check the overall cost associated with trading with it.
- Use leverage with caution: Forex trading allows you to use leverage. Every broker offers a different leverage. Your broker may be offering 1:100 leverage. This means that you can enter into trades worth $100 by investing only $1 of your money. Even though leverage can increase your profit margins, it also amplifies your losses.
- Use risk management tools: There are several risk management tools such as stop-loss, negative balance protection, risk-reward ratio, etc., which can help you manage your risk associated with every trade. You should use all or any of these techniques every time you trade so that you do not experience excessive or unforeseen losses.
- Research and gain experience: There are two ways to start trading more effectively and profitably. You need to read as much literature on forex trading as you can. You also need to practice your hand at trading on demo before investing any money.
- Review your past performance: To grow as a trader, you need to learn from your past mistakes. After every trade, you should take some time to review that trade and figure out what you could have done better.
