Forex Trading in Kenya: All You Need to Know About It

• Forex trading is becoming popular in Kenya

• The opportunities in this Market are limitless

• Your require a good broker to open a trading account

Forex trading is the process of buying and selling currencies. The market where this happens is called the Forex market. Forex trading in Kenya is a legal business with thousands of Kenyans doing it daily. Currency exchange involves the trading of one currency against another.

In the Forex market, currencies exist in pairs. An example is the Kenyan shilling against the United States dollar denoted as USD/KES.

Forex traders buy and sell currencies for a profit through successfully predicting future price movements. However, if the prediction is wrong, you make a loss.

Globally, Forex is the largest market in comparison to its peers such as the stock market, commodities market, and cryptocurrency market.

Every Kenyan can qualify to become a Forex trader as long as you meet some of the below requirements.

What are the requirements to start trading in Forex?

Below are some of the basics you require to start trading in Forex.

• Trading device-A smartphone Or Personal computer
• Connectivity to the internet
• A trading account with a broker
• Starting capital
• Trading strategy

1. Trading device

This is the device that enables you to access the market. Forex trading is done on trading platforms offered by the brokers. These platforms are just application software’s that you download and install on a trading device such as a smartphone, tablet, or personal computer.

One of the most common trading software is known as Metatrader.  

2. Internet connectivity

The Forex market is global hence the need for real-time access to allow determine currency prices. This is made possible through internet connectivity.

As a trader, the faster your internet is the better.  This enables you to execute your trading decisions faster on a timely and precise basis.  Internet connectivity also allows access to the global news which is key in making trading decisions.

The levels of internet access and speed are improving by the day in the country. At the current status, you can access reliable internet in almost all parts of Kenya.

3. Trading account

A trading account is where you top up money to enable trades execution. It is normally given by the broker. A broker is an intermediary that provides a platform for trading connecting both the buyers and sellers.

To get an account with a broker, you need to provide your identification details such as the

• National Identity Card/Passport
• Passport photo
• Proof of residence

Upon successful verification of these documents, the broker gives you a trading account. At this point, you are set to deposit money to start trading.

4. Starting Capital

Just like any other investment, you need capital to trade in Forex. The good thing is that most brokers allow you to start with as little as $10 translating to approximately 1,000 Kenyan shillings.

The amount of capital you have determines the trading size. It also determines to a large extent the potential profits or losses.

Hence, don’t be held back in case you thought that Forex trading needs a lot of money to undertake. This little capital threshold enables almost everyone to participate in this market.

5. Trading strategy

A trading strategy is a general plan a trader uses to execute trades in the market. It takes care of all aspects of trading such as the types of currency to trade, risk management, and lot size.

There are different types of currency pairs you can trade in the market. Different pairs have different characteristics and hence you should do enough research before settling on your choice.

Currency pairs are divided into three

• Major pairs-These are currency pairs with the highest liquidity levels in the market. Mainly, they represent the largest economies in the world Such as the EUR/USD (Euro/ US Dollar)
• Minor pairs – They are major currencies but don’t have the United States dollar in the combination such as EUR/GBP (Euro/Great Britain Pound)
• Exotic pairs– These pairs experience little market turnovers and mainly below to the developing countries such as NZD/SGD (New Zealand Dollar/Singapore Dollar)

How to fund the trading account

Upon successful account opening by the broker, the next step is funding it to begin trading. There are various methods you can use to send funds such as;

Mobile money channel-This involves sending money through the various mobile money providers available in Kenya such as M-PESA. This is the most common method that traders use in the country due to its ease and convenience.

Direct Bank Transfer-It involves doing a bank transfer through various existing channels such as EFT, RTGS, or Internal Transfers

Online card payment- You can use your cards both Debit and Credit cards to make payments.

Swift payments– Swift payment allows sending of funds across borders. This happens if you are using a broker that is not local.

Is Forex trading profitable?

Forex trading is an investment and yes, it is profitable. However, profitability is not a guarantee. It requires hard work and persistence to attain. The challenge with most investors is the expectation of immediate returns.

This is not true as the market just like all businesses has its own rules. Success in Forex trading requires traders to have some characteristics such as

• Risk-taking
• Patience
• Hard work
• Emotional control

Forex market tops in the risk chart due to its volatility. Statistics show that majority of fore traders fail. Hence, you require high levels of risk tolerance and management to succeed in the market.

Patience is also a key component when trading Forex. It takes an average of 6 months to a year before you can become a successful trader. Even after achieving this milestone, you also require patience to enter and exit trades.

Lack of the same could result in making the wrong market decision that could end up increasing losses.

Forex trading is an emotional undertaking. This is because losses and profits are limitless. However, to succeed, you need to have great levels of emotional control to avoid greed that is suicidal for traders.

How long do you need to train before you can start making profits?

This is always a question most beginners have. The answer is not definite but depends on an individual. The harder and smarter you practice and learn, the higher the chances of becoming profitable.

As a general rule, it averages a minimum of 6 months to one year to become a profitable trader. For a starter, you should focus more on developing a winning trading strategy rather than profitability.

In some cases, some traders never become profitable and end up quitting the practice. However, once you get a winning strategy, the opportunities are endless.

Where to learn Forex trading in Kenya

It takes a tremendous amount of learning to become a consistently successful Forex trader. There are numerous amounts of learning material available in the market on Forex trading.

You can either choose to take formal classes or do self-learning. Taking classes is better but it comes at a cost. If you are doing self-training, you can use materials available on online platforms such as YouTube or books.                                                                  

Due to the huge amount of information in the market, it is advisable to learn strategically to avoid confusion. It is best to engage a professional for guidance and assistance on the relevant material.

Another approach to learning is through getting a mentor. This is mostly someone who has been in the industry and understands the trade. A mentor has already gone through the processes hence a great source of knowledge.

Mentors help reduce the learning curve and enable you to get into the live market earlier.

Learning Forex trading requires both theoretical and practical knowledge. This is because trading is practical. One of the ways to conduct practical learning is through using demo platforms.

These are normally provided by the brokers after registration. They mimic the live market and help a trader to test the trading strategies. Once you are successful on the demo platform, you can now move to the live platforms to begin trading with real money.

Advantages of Forex trading

• Limitless income opportunity

As the largest financial market, Forex trading offers limitless income opportunities for traders. The fore market turnover averages 6 trillion dollars daily.

This dwarfs its peers such as the stock market by a big margin. The big market size offers a huge opportunity for traders to make as much as they can depending on their capital and risk tolerance levels.

It is also global making it accessible almost in all parts of the world. For a beginner, the income could be little. However, once you get a winning strategy, you can make as much as your capital can support.

• Flexibility

The Forex market runs 24 hours a day five days a week. This makes trading possible even for traders who could have other day jobs.

In comparison, most office jobs are not flexible as the reporting and closing times are clearly defined.

• Access to Leverage

Brokers provide leverage to traders enabling them to execute larger trades than their capital can support. Leverage is a credit amount a broker allows traders to access to make trades.

Profits and losses in Forex trading are calculated in form of pips, the smallest units of a currency. With leverage, a movement in pips enables a trader to realize significant gains.

On average, most brokers provide leverage by a 400 multiplier. However, it is good to note that leverage could also be a source of losses if the market goes against you.

Challenges of Forex trading

• Long learning curve

Unlike some businesses, it could take years to become a successful Forex trader making it a key barrier to potential investors that lack patience.

As per the statistics from most brokers. An average of 70% of all traders end up losing money in this market. The learning curve is a major contributor to this failure rate, especially for those traders that take shortcuts.

• Exposure to losses

With the potential of huge losses in the market, Forex trading is among the riskiest undertakings in the finance industry. Some of the contributors to losses include a lack of trading strategy and poor risk management.

Other elements such as fundamental market changes, high broker fees, inadequate knowledge, and greed also greatly contribute to losses.

• Fraud

Fraud mostly happens through engaging potential brokers that operate illegally in the market. Without proper regulation, a broker could end up disappearing with your funds as there is no way to hold them accountable.

As a trader, you should always ensure to use a genuine broker to avoid losing your investment. You can do this by confirming a broker status with the capital markets authority (CMA)

Forex trading brokers in Kenya

There are numerous legal Forex trading brokers in the country. This list comprises both local and international brokers.

The choice of the right broker depends on your expectations as a trader.  This is because brokers operate differently and each is unique.

Below are some of the key factors you should consider when choosing a broker.

• Leverage-This is the amount of debt a broker allows you to access to increase your trade size. Because it is a debt, you should not only check the leverage multiplier but also the cost. Hence, always strive to get a broker offering the best leverage both in amount and fees.
• Legality– You should ensure to get a broker that operates legally in the country. This ensures your money is safe and can always get legal solutions when the need arises.
• Flexibility– The broker should offer flexibility to enable make deposits and withdrawals. Hence, a good broker should allow financial transactions through the readily available channels locally. Some of these include the use of mobile money such as M-PESA and the local bank channels.
• Customer support– Brokers are required by law to offer their customers support in different ways. Some of these include regular training and market updates. Most of the legal brokers in Kenya offer these services as it is one of the key requirements the regulator enforces.

Forex Trading Brokers in Kenya

Below are some of the Forex trading brokers with the capital market authority (CMA) license to operate in Kenya.

• EGM Securities Limited (FXPesa),
• SCFM Limited (Scope Markets),
• Pepperstone Markets Kenya
• Exinity East Africa
• HFM Investments
• Windsor Markets (Kenya) Limited

However, other brokers operate in the market both local and international but lack the CMA license.

It is key to note some risks exist by trading with unlicensed brokers. For a beginner, it is better to settle among on a broker under government regulation.

Types of Forex Traders

There are different types of Forex traders in the market. The type of trader is dependent on the trading style more so the amount of time you are spending in the market.

• Scalpers

These are traders who hold trades for very little time. This could mainly be in seconds or minutes. Scalpers target to make many trades with small returns.

A key characteristic of scalping is that it requires a trader to be present during the trade duration. Scalping is also highly risky and hence it requires experience and good risk management skills. 

• Day traders

These are traders who ensure all trades open and close within a day. Day traders ensure they are out of the market by the close of a trading day.

Just like scalpers, day trading requires experience and availability. Risk management is also key to ensuring there is a return after closing the trades.

The majority of scalpers and day traders do this as a full-time job.

• Swing traders

Swing traders hold a trading position between 2 days to a few weeks. They are patient and target price swings to enter the market.

It requires less attention to the previous two. Swing trading is ideal for traders with other engagements and can only spend a few hours analyzing the market.

This is the ideal trading style for beginners as it gives you adequate time to study the market before making trading decisions. However, as you gain experience, you can transit the short time frame trading.

• Position traders

Finally, position traders target to hold trades between a few months to years. This is a long-term trading style that works as an investment.

Position trading requires a great understanding of the fundamentals in the market. Position traders also ignore the short-term price movements such as scalpers and day traders.

One key element that you must have as a position trader is patience. This is because the market takes a long time to reward.

Conclusion on Forex trading in Kenya

With the Forex trading business getting popular in the country, it presents numerous opportunities to make an extra income with the potential of becoming a full-time job for successful traders.

However, it requires adequate learning and experience to become a successful trader. Your preference trading style will be determined by key elements such as time availability, risk management, and experience.

This market can only get bigger in the future.

Hence, if you have interest and passion, I would suggest you get going today.

All the best.