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Forex Trading in Kenya – What Investors need to Know

The Forex Market involves buying, selling, or exchanging currencies from all around the globe. It determines the exchange rates of all global currencies and is the largest financial market in the world with a daily volume of $6.6 trillion in transactions.

The Forex Market involves buying, selling, or exchanging currencies from all around the globe. It determines the exchange rates of all global currencies and is the largest financial market in the world with a daily volume of $6.6 trillion in transactions.

The participation of Governments, Banks, Global Companies, and Institutional investors make up the majority of this market. Retail Forex Trading is a smaller segment of the Forex Market where retail investors speculate on the exchange rates between various currencies.

How does Forex Market work?

The two main factors that move the forex market are supply and demand. If the supply is more than the demand for a currency, its value will decrease, and vice versa. Other complex factors also affect the value of a currency such as a country’s economic output, FDI inflow, the balance of payments, intervention or pegging of currency by the country’s government, social factors, and political conditions. But ultimately the supply and demand of a currency in the global market determine its price.

Under the Bretton Woods system of 1944, all currencies were pegged at the same value against the US dollar and central banks agreed to maintain that fixed value by buying their currency when it was devalued and printing more currency if it became too strong.

But after the Bretton Woods agreement collapsed in 1971, currencies were allowed to float freely in global forex markets just like commodities and stocks. The US dollar still remained the Base Exchange currency for global trade. And as the demand for one currency became stronger or weakened against the USD, it either valued higher against the US dollar or devalued against the dollar depending on the demand.

What is Forex Trading?

Forex Trading is the process of buying and selling currencies in the Forex market. Your bank, governments, global companies, and speculators use the forex market to exchange currencies. Currency prices continually fluctuate depending on the above factors.

Speculators and investors make up 5.5% of the forex market as small and institutional investors buy and sell currencies intending to make a profit from the difference in exchange rates. This is called retail forex trading.

For example, 1 USD (US dollar) is currently selling at 106.29 KES (Kenya shilling). That trade is called USD/KES in the forex market. The USD is the base currency (that you want to buy) and KES is the quote currency (that you want to sell). So you can buy 1 USD for KSh 106.29 in the forex market.

So, if you want to go abroad for study or travel, you will have to buy USD at the current USD/KES quote from your bank. Your bank will normally add a ‘spread’ or commission to the quoted rate. In this case, you are effectively trading forex in retail and your bank is acting as your broker in the forex market.  

The  Capital Markets Authority began regulating Kenya’s retail forex market in 2018 and allowed retail traders, investors and brokers to take part in this market. This boosted currency exchange & forex trading activities and there are now estimated to be over 70,000 traders in Kenya who regularly participate in the market to speculate on currency fluctuations.

How can you trade forex in Kenya?

Under the Capital Markets Online Foreign Exchange Trading Regulations enacted in 2017, the CMA provides three types of licenses:

  • The Dealing Foreign Exchange Broker
  • The Non-Dealing Foreign Exchange Broker
  • The Money Manager

The Dealing Brokers and Non-Dealing Brokers (a and b) offer derivative instruments on forex but they do not offer investment management to clients. However, the Money Manager (c) can manage the forex portfolio of a client.

The CMA does not regulate individual forex traders but brokerages must get the relevant license from the CMA to offer Forex Trading instruments. The CMA has licensed three Non-Dealing Online Brokerages. Only one company is licensed as a money manager.

You can trade forex in Kenya through any Dealing or Non-Dealing Broker or Money Manager licensed by the CMA. For this, the broker will usually charge you a commission or spread.

The spread of a broker is measured in percentage points or ‘pips’. Brokers can either charge Fixed Spreads or Variable Spreads which depends and varies from broker to broker.

Basic steps involved in opening a forex account:

  1. Compare the types of accounts on the broker’s website. Decide on the type of account based on your needs and resources.
  2. Fill out an application form and complete KYC (Know Your Customer information).
  3. Upon successful completion, you will be given a username and password.
  4. You can log in to the client portal of the broker’s website using the given credentials.
  5. Once you successfully transfer funds from your bank account, you will be ready to start trading.

What should you look for while choosing a Broker?

As an investor, you should always choose a CMA regulated broker.

The CMA will help to protect your money from fraudulent activities or exposure to an excess of risk by maintaining safe trading conditions.

The CMA also ensures that the broker doesn’t use your funds for their own benefit.

In the case of any disputes, you can approach the judiciary to seek damages.

The CMA makes sure that regulated brokers submit financial reports periodically to keep the investors safe.

There are only three forex brokers that have been regulated by CMA as Non-Dealing Online Brokers in Kenya. They are:

-EGM Securities which operates FXPesa

-SCFM Limited

-Pepperstone Kenya

The CMA advises against using a foreign broker but if you prefer to take the risk, make sure that the broker is supervised by a reputable regulatory body such as the UK’s FCA, the Australian ASIC, or Cyprus’s CySEC. Regulators make sure that proper trading environment & safety is ensured for investors.

It is always best to choose a broker that offers local customer support and local deposit/withdrawal methods for easier transactions.

Whether you are a new investor or an experienced one, always start off by trading on a demo account when switching to a new platform. While most platforms offer the same features, they usually look or feel different. A demo account will help you to get a grasp on all the tools offered by the platform.

Demo accounts also help you to learn the specifics about the platform, like the spread or order entry procedure.

Once you finish trading on a demo account, you can take a look at all the profits or losses you have incurred. This can help you build a new strategy or check the effectiveness of the one you have in mind.

Risks of Forex Trading

Retail Forex Trading is a very risky business, riskier than traditional investments like stocks.

Some common risks are:

High Leverage

Leverage is used to increase the returns on investment by borrowing money from a broker. It increases your market exposure and thus puts you at a greater risk. During market fluctuations, there is a chance to lose your invested capital and even more in some cases.

High Volatility

The forex market is highly volatile and this volatility helps speculators to make a profit. This attracts a lot of short-term traders and speculators but the market is unpredictable and can go against you at any time. The market also remains inaccessible over the weekend so any unfavorable development during this time might lead to significant losses.

Liquidity Issues

The liquidity of a market stands for the ease with which you can open or close your trading positions at the price you are expecting or similar to the same. While the forex market is generally considered to be one of the most liquid markets, there are times when it goes through stages of low liquidity. The forex market exhibits low liquidity on holidays and weekends as banks are closed during this time.

The forex market is considered risky, especially for beginners. This risk increases if the investor does not have negative balance protection or a stop-loss in place.

Negative balance protection prevents your account balance from going negative when you incur substantial losses. So make sure your broker offers negative balance protection and stop-loss as a safeguard against undesirable developments.

Protect yourself against scams

As there was no regulatory body in Kenya to monitor the forex brokers until 2018, there are still many illegal and unregistered brokers in Kenya. Over 100 such companies are yet to get their licenses from CMA.

The biggest Forex scam in Kenya was the VIP Portal. In 2013, the company promised clients to invest their money in forex trading on their behalf. They promised that they would double their money. Moreover, the company also promised investors an additional 5% of the money for every person they would bring in as a new investor. Over 13,000 individuals deposited their money and the losses were reported to be more than $2.9 million from Nairobi alone.

Some common forex scams you need to avoid are:

The Signal-seller scam

Signal-sellers are traders or companies that offer professional recommendations on favorable times to buy or sell currencies in return for money. These signals are often wrong and can result in losses for you.

‘Robot’ Scamming

A ‘Robot’ is an automated trading program. The scammers claim traders would be able to earn even while sleeping. These systems often don’t work and many of them have never undergone a formal review or test.

Fake Broker or Investment Scheme

They claim to double your money or offer big returns without proof. They are not regulated and they keep your money for themselves rather than investing it.

Conclusion

Despite the risks, the forex market is crucial for the global economy. Speculators or traders can use the forex market to invest money but they need to be cautious.

It is important to first educate yourself about the forex market before starting to trade. Learn the basics first, then practice on a demo account, and finally start investing in small amounts.

You should also learn to use risk management tools like stop-loss, negative balance protection, risk-reward ratio to name a few. These will limit any losses and protect you from losing your entire capital.

Lastly, make sure you trade in a regulated environment so that, if something goes wrong, you can seek redress.

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Forex Trading Knowledge Questions and Answers

Forex Trading Knowledge Questions and Answers

Forex Trading Knowledge Questions and Answers

What Is A Demo Account?

Demo accounts enable new investors to test their ideas and learn how to use trading technologies without risk. Users can use the demo account to trade with simulated money and see what their returns would be if they traded with real money. Demo accounts are often used in schools and universities to teach investing and compete in trading competitions.

Demo accounts are commonly used by stock traders, currency exchange traders, and commodities dealers, but not by long-term investors. A demo account is less effective since the longer it takes to produce earnings from an investment, the more time it takes away from compounding real money.

 

How Does A Demo Account Work?

Using demo accounts, investors can practice trading on a platform without putting their own money at risk. You will not be exposed to the dangers associated with live trading platforms on a demo account. As a result, you can learn how platforms work without putting your money at danger.

A demo account guarantees that you will not lose money, but it also guarantees that you will not make money. To reduce risk when trading on the real market, traders must learn discipline and establish techniques.

How to Open A Demo Account?

In general, opening a demo trading account is pretty simple. Choose a Broker – Most brokers provide demo trading interfaces to help you become acquainted with the features and create techniques. Choose which broker to use initially.

Registration is necessary, and you must provide your personal information. Name, address, and financial information will be requested. Your identification will almost certainly have to be validated as well.

Once you’ve decided on a broker, you can install MetaTrader4. Once you have decided on a broker, you will require a trading platform. MetaTrader 4 and MetaTrader 5 are the most popular trading platforms.

You will obtain login details after registering with a trading program. You will be able to open an account.

How Long Do Demo Accounts Last?

Traders can use a demo account to test out a program for up to three months before deciding whether to purchase the complete edition. The three-month term is basically offered to guarantee that the prospective buyer has enough information to make them desire to buy.

Why Is It Necessary to Open A Demo Account?

Traders can use a demo account to test out a program for up to three months before deciding whether to purchase the complete edition. The three-month term is basically offered to guarantee that the prospective buyer has enough information to make them desire to buy.

What Are Advantages of A Demo Accounts?

Demo accounts are an excellent method to learn about various trading tactics and software. Paper trading is a lot safer way for a beginner investor to make technical mistakes than real trading. Investors can benefit from the customised trading software provided by each firm.

A demo account lets you to test methods without risking any money, whether you are a novice or an experienced trader. Trading on a demo account allows the trader to test the approach before trading with real money.

Even though many traders begin with equities, commodities and Forex can be profitable. The same strategies, however, may not be applicable in all three asset groups. A demo account allows experienced traders to experiment with several asset classes.

 

The Differences Between Demo & Live Accounts

A forex demo account is distinct from a genuine account in that it is utilised as a training account for traders to practise trading without putting real money at risk. Real accounts, on the other hand, use actual money, and traders put their own money at risk. A demo account enables users to trade with fictitious money in order to imitate the earnings they would receive if they traded with real money. Demo accounts are often used in colleges and institutions to teach investing and compete in trading competitions.

However, studies have shown that even if a person has obtained extensive trading expertise through the use of virtual accounts, things may turn out differently when real money is involved. Because you are not putting anything at risk  is more accessible when dealing with virtual money than when trading with actual money.

Can I have Multiple Forex Demo Accounts?

You may be able to open up to five demo accounts depending on the broker. Some, however, provide up to 19 demo accounts. There is no way to predict how many demo accounts are available at any particular time. All brokers do not limit the number of demo accounts.

If your broker has a demo account limit, you can contact their customer service via email or live chat to request more demo accounts.

There are brokers who will only allow you to open one account of each type per email address.

As a result, you are not able to establish any additional accounts until you give them with another email address or open a new account. Traders do not benefit from this practise because it requires them to spend their resources on opening new accounts rather than allowing them to open as many as they like.

In most circumstances, you won’t need more than five accounts, and depending on your plan, one may enough.

In any case, you should practise on a demo account until you are really proficient.

Is A Demo Trading Account Free?

Demo platforms are usually free. There is no risk of losing money because you will not be dealing with real money. As a result, there are no deposits, withdrawals, or training fees involved.

 

How to Choose Forex Accounts?

Different accounts have different settings. Before you open a trading account, you should answer the following questions:

How much money do you want to put down? You should keep in mind that trading with money you cannot afford to lose is not a good idea.

What is your level of risk tolerance? If you are a cautious trader, you can open a micro account and trade micro-lots. However, if you wish to trade more aggressively, you should open a regular account.

Do you require any specialised equipment? Many forex brokers provide their best trading tools to its professional clients, which may include cutting-edge news analysis or access to a diverse set of indicators.

Once you’ve determined what kind of trader you are, your trading objectives, and your risk tolerance, you’ll be able to choose which account is best for you.

Can I Take Money Out of a Demo Account?

Unfortunately, the answer is no. Demo accounts are only for practise purposes. You do not deposit anything because the account is not funded with real money.

As a result, any profits you would have made would be ineligible for withdrawal.

Forex Trading Knowledge Questions and Answers

Forex Trading Knowledge Questions and Answers

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AvaTrade introducing 3 new crypto pairs

crypto trading with Avatrade

AvaTrade introducing 3 new crypto pairs – updating 3 others

AvaTrade has yet again improved their cryptocurrency trading offering.

AvaTrade is introducing three new cryptocurrency pairs: NEOUSD, EOSUSD & MIOTAUSD in addition to the 15 crypto assets already on offer.

These new pairs have been available since July 1st, 2019 and provide an excellent opportunity to diversify your clients’ portfolios and increase their exposure to this vibrant 24/7 market.

AssetTypical SpreadLeverageMarginMin Nominal Trade Size
NEOUSD1.5% Over-market2:0150%10
EOSUSD2% Over-market2:0150%10
MIOTAUSD1.5% Over-market2:0150%10

To unify their cryptocurrency instrument labels, They are relabeling their existing Ethereum, Ripple & Litecoin instruments, by replacing the existing instruments with new USD labelled ones:

AssetOld SymbolNew Symbol
RIPPLEXRPXRPUSD
ETHEREUMETHETHUSD
LITECOINLTC_MiniLTCUSD

These new pairs have also been available since July 1st,

The trading conditions for each one is identical to those of the older respective assets they replace.

Effective immediately, new positions are only available on the new pairs.

Avatrade Clients will not be able to open new positions on the old assets, but those already open will remain unaffected until July 29th.

Existing positions on XRP, ETH and Litecoin-mini that remain open on July 29th will be automatically replaced with corresponding positions on the new pairs, , at the same opening price and at no cost to clients.

as any broker that values their clients would do , Avatrade makes sure that the clients will not be affected by the change.

Visit Avatrade NOW

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Neteller Launches Cryptocurrency Exchange Service

Neteller Launches Cryptocurrency Exchange Service

Neteller  one of the most known Digital fiat currency wallet provider , has started allowing its users to buy, sell, and hold cryptocurrencies including BTC, BCH, ETH, ETC, and LTC.

They do this on the large scale with a pilot in 10 countries and soon another 50 countries to join . They understand that if you do this effort it will only succeed if you can do this on a global scale.

Neteller and Cryptocurrencies

Neteller is a service which is operated by Paysafe Financial Services Ltd.,

paysafe

paysafe

founded in 1999, Paysafe Financial Services entered the market with the mission to provide an online alternative to the known traditional payment methods.

Most of the traders aiming us now neteller as one of the companies through which we made our deposits and if we had any profits also our withdrawals. A couple of years ago they left the Forex and Binary industry behind since the charge-back issue became just too expensive.

But as any companies knows, if you do not adept you die. The binary option market is all but dead and the Forex industry has moved also into the directions of the cryptocurrencies. thus, neteller understands that this is where the future is.

So Lasts week they announced that they are now offering a wallet with buy and sell cryptocurrency options.

As of today, Neteller users can buy, hold and sell cryptocurrencies via a recognized cryptocurrency exchange including bitcoin, bitcoin cash, ethereum, ethereum classic and litecoin, purchased using any one of 28 fiat currencies available in the Neteller wallet.

It may not seem so exciting but for many users that love this service it actually is. More and more currencies will be added making them an true exchange in the near future.

Now one is able to fund their neteller account through many different means (Mobile, Epay, Paysafecard, local bank deposits, and bitcoin)

We think that will make the threshold for many people, who would want to buy or sell cryptocurrencies, lower. This in return is a good thing for the overall acceptance of the cryptocurrencies in the mainstream of every day life.

Conditions for buying and selling cryptocurrencies through Neteller

The rates offered are somewhat in the lower middle of the current market making them go for the save route. The average market rates on the major cryptocurrency exchanges differ all in all not that much anyways, as this is not the main reason to choose to buy Bitcoin through Neteller

The minimum cryptocurrency purchase or sale amount is “approximately equal to 10 EUR,” the firm clarified, adding that the maximum amount depends on the transaction limits associated with each account.

When You open an account with Neteller you have to choose your default currency. This is of course for most people in accordance on their geographical locations, people in Britain will go for the pound most Europeans go for the euro and pretty much the rest of the work goes for the US Dollar, thou other currencies are available

The fee is 1.5 percent for purchasing and selling cryptocurrencies from wallets with EUR or USD as the default currency.

The fee rises to 3 percent for wallets with other default currencies.

Neteller  | Why is this a good move for neteller and one that we should expect from other online Payment providers as well ?

At this moment till last week Neteller users can pay, get paid on thousands of sites, and send money around the world through their system.

The company claims to have “millions of point-of-sale, ATM and online locations” for users to withdraw or spend their cash.

Last July 25, Paysafe ( which as you remember is the company that owns Neteller and Skrill)  announced that another digital wallet provider in its group, Skrill ( formerly known as moneybookers), started allowing customers to “instantly buy and sell cryptocurrencies, including bitcoin, bitcoin cash, ether and litecoin, using any one of the 40+ fiat currencies available in the Skrill wallet.”

We could now see that this was like their test run on this concept.

We do not know the numbers that Skrill produced since they offered this service but it must have been encouraging enough for Paysafe to include their flagship brand in this endevour.

We will see where this leads but we are hopeful that this is the next step in global acceptance to the cryptocurrency revolution. Let me know what you think

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