Around the globe, Forex trading is becoming more and more popular, pretty much every country in the world has a community of traders within it and Kenya is no different. The forex markets offer its traders high levels of liquidity, low costs, a large selection of trading platforms, and many different assets and currency pairs to trade. Over recent years, the popularity of trading in Kenya has been on the rise with there being many more retail traders each and every year. There is now a predicted 70,000 plus traders in Kenya according to recent estimates, and this is a number that will only go up.
Living in Kenya does not limit you from trading in the global markets. There are brokers and markets available to you just like anywhere else in the world, there are Kenya based brokers as well as a large number of brokers based outside of Kenya that are available for Kenyans to trade with. Trading through these brokers is incredibly easy and incredibly simple. All you need these days is a computer or smartphone and an internet connection. You can then simply sign up and begin trading. Forex trading is all about trading the movements of currency value.
In terms of regulation in Kenya, the regulatory body in Kenya is known as the Capital Markets Authority or CMA for sport. Every broker that is based in Kenya will need to be authorised by the CMA in order to legally serve residents from Kenya. There are, of course, other brokers as mentioned that are not located within Kenya that also serve people from Kenya. The CMA advises against using these brokers, but depending on the trader, this may be the best course of action to take. The decision will be up to you.
When you are choosing the broker that you want to use as a Kenyan, there are a few different things to consider. Firstly, there are a large number of regulatory bodies the most known ones include the FCA in the Uk, NFA in the US, CySEC in Cyprus, and ASIC in Australia. Then there is the CMA that we mentioned above in Kenya. Many will say that a good broker needs to be regulated but this is not necessarily the case. Many regulated brokers will protect your funds, but the actual way that they run is very similar to the non regulated ones, well at least the better-unregulated ones. Many see regulation as a symbol of trust, and some brokers are also regulated by multiple regulatory bodies from different countries.
So let’s assume that you have decided to trade in Kenya, there are a few things that you would need to do in order to ensure that you trade safely there. The first is to get a good understanding of what trading and forex actually is. To put things simply, trading is about the exchange of currencies, but when using a forex broker you are trading on CFDs which are contracts for Difference. This basically means that you are not physically buying the assets or currencies, instead, you are simply stating whether the price will go up or down.
You then need to get yourself a broker, there are a lot of them out there, we mentioned about regulations above, whether you go for a regulated broker or not is up to you, but there are a few things that you need to consider. Think about the spreads that are being offered, the minimum deposit that they require for the different currencies and other instruments that are available to trade with them as well as many other factors such as commissions. You should also select an account type that suits both you and your needs. There are many different types from a standard account, ECN accounts, STP accounts, and even micro accounts that require far smaller deposits.
So you have your account ready, but are you aware of the risk involved with trading? It is important to understand them so you can try to avoid as many of them as possible. When reading you will be using leverage, this is where you can borrow money from the broker in order to place larger trades, this leverage can increase your profits but it can also increase the potential losses, if you are not a confident trader then we would suggest using a lower leverage in order to help protect your account from large movements. You should also be aware of the volatility that can come with the markets, any sort of news event can cause the markets to jump.
Different currency pairs also have different volatility, the higher the rate volatility the more the markets will jump about, making them quite dangerous trading environments. You should also keep an eye out for anything strange that may be happening with your broker, some have been known to manipulate their markets and charts. For this reason, ensure that you are using an ECN or STP broker, this eliminates the ability for the broker to manipulate the markets and to trade against you. Instead they will be trying to help you win, as that is how they make their money.
Now you need to do free things that will help to mitigate any risks, you will never be able to get rid of all risk. The only way to do that is to not trade at all, but we can certainly reduce some of them. Get yourself an education, learn as much as you can, start with the basics and then start to work your way through all that there is, learn a strategy, risk management, and more. You will never learn everything, but understanding that you will always be learning is a good place to start. You should also ensure that you are using a save leverage, do not go crazy, some brokers are offering up to 2000:1 which is high, very high. You should not be going higher than 200:1or 500:1 if you can, as this leverage offers you good margins and profit potentials without going too high and increasing risk too much.
We mentioned getting yourself a good broker. Take your time to work out which one you want to use. This can be a big decision but it is not a final one, you do get the opportunity to change and many people do throughout their trading careers. Lastly, you need to ensure that you have your risk management plan in place, this will include your risk to reward ratio, how much you will risk. Some people go for low numbers, others for things like 10:1, it needs to be in line with your strategy and within your own levels of risk tolerance. Your risk management plan can be one of the most important aspects of your trading career.
The final and important tip is to simply trade with what you can afford. If you need the money for food or rent, or it will cause you issues if you lose it, then do not trade it, only trade what you can afford to lose, this cannot be said too many times. So those are some of the things that you can do in order to trade safely within Kenya. Ultimately it is up to you which broker you go for, which currencies you trade, and the sort of account that you use. Take your time to learn and educate yourself, spend only what you can and you should be in a good place for some safe trading in Kenya.