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How to Safely Trade Forex in Kenya – Capital Business

NAIROBI, Kenya, Jul 20 – Forex trading has been increasingly gaining popularity in recent years. According to BIS, nearly $6.6 trillion is traded daily over the globe on an average. Due to its high liquidity, 24-hour nature, low transactional cost, fast paced regulations, easy to use platforms, the Forex market has become the largest financial…

NAIROBI, Kenya, Jul 20 – Forex trading has been increasingly gaining popularity in recent years. According to BIS, nearly $6.6 trillion is traded daily over the globe on an average. Due to its high liquidity, 24-hour nature, low transactional cost, fast paced regulations, easy to use platforms, the Forex market has become the largest financial market and is constantly increasing at a rapid pace.

Forex market has also gained attention of traders in Kenya recently – which is visible through rising demand, growing number of active traders and increasing trading volumes of Forex in Kenya.

“Kenya now has over 70,000 forex traders according to recent estimates and market is well regulated by CMA and there are 3 regulated forex brokers”, as per local website Trade Forex Kenya.

Forex trading involves speculating on prices of currency pairs that fluctuate all the time due to international affairs. Traders often use margin trading to speculate on currencies, the involvement of leverage and margin increases the risk factors for traders, due to which sometimes they even risk losing more than invested amount. Hence, the forex market is quite risky for new as well as experienced traders.

So, for new investors looking to trade forex, it’s important to have proper understanding of the risks and how they can reduce their exposure to these risks.

The risks in Forex trading cannot be eliminated however with proper knowledge, experience, and several precautionary measures, the risks can be mitigated and reduced to some extent.

We look at these risks and how one can protect themselves against these risks.

How can Kenyans trade Forex?

Forex trading means buying and selling of currency pairs like USD/EUR at varying prices. Kenyans can trade in the foreign exchange market through any Retail CFD or Forex Broker in Kenya.

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How does Trading through a Retail Forex & CFD Brokerwork –Traders using retail Forex and CFD broker do not own the asset or currency physically, but only speculate on the price movements of currency pair via CFD instrument created by the broker. It is the most common way to trade Forex online in Kenya.

Forex Regulation in Kenya –The Capital Markets Authority (CMA) of Kenya is the regulatory authority that monitors financial conduct in Kenya. Every Forex broker based in Kenya has to be authorized by CMA to serve Kenyan customers. There are also some brokers who are not based in Kenya that serve Kenyan traders, this is against CMA regulations and CMA advises traders against using such brokers.

Choosing a Trusted Broker – There several regulatory authorities around the world. Most famous of them are FCA of UK, NFA of the US, CySEC of Cyprus and ASIC of Australia, CMA of Kenya. A good broker has to be regulated by a trusted regulatory authority. And if the broker is regulated by more than one top regulatory authority than it’s a good sign of trust. For example: Pepper stone regulated by CMA is also regulated by ASIC & FCA.

Steps involved in Forex Trading –

1) The first step of forex trading for any new trader is to make a choice by comparing and selecting an ideal broker for oneself.

There are 3 Forex & CFD brokers that are available in Kenya that provide retail Forex trading. Each broker has different trust factors like some are regulated by multiple regulatory authorities while some offer different services depending on the leverage ratio, types of accounts, spreads, minimum deposits, wide range of instruments and various other factors.

Choosing the broker with higher number of regulations will enhance the safety of traders. First thing for Kenyan traders is to look into CMA regulation of broker then other Tier 1 regulations if required. Brokers regulated with CMA & other Tier 1 authority is a positive sign. Regulatory authorities like CMA, FCA& ASIC provide better protection to the traders and the traders must seek for the brokers that are well regulated. Better regulation will mean lesser chances of fraud, safe trading environment with restriction on leverage and better downside protection.

The brokers should be compared on multiple bases and the most convenient one should be chosen with reasonable and effective features.

2) After choosing the broker, second step is to choose an account type as per the requirements of the trader. Different account types might have different fees, minimum deposit/withdrawal, and various other features.

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3) Once the broker and account type are compared and you have chosen a broker, you can sign up as an individual or open a corporate account if you are a company. For this you need to fill up the broker’s KYC form with basic details, and submit the ID proofs to complete the KYC at the broker.

Once KYC is complete, you can deposit the funds &start trading. Traders can also choose a demo account at the broker to test their trading environment & other features before depositing money.

What are the Risks Involved?

In order to mitigate the risk, it is essential to identify them. The risks involved in Forex trading can be grouped into 4 main categories:

  • Volatility in Market: Forex market can be highly volatile and the price movements can be difficult to predict even for experienced traders. The market is active 24 hours a day and depends on multiple factors throughout the world. Any economic activity in any corner of the world can fluctuate the expected price movement of the currency pair. This movement is hard to predict even after detailed fundamental and technical analysis. Like, the high market volatility during Swiss Franc Uncapping, major & emerging markets currency volatility, oil price crash during the Covid-19 crisis – which caused huge losses even to seasoned investors.
  • Risk of Leverage/margin: Money can be borrowed from the broker for Forex and CFD trading. The borrowed amount is called leverage which allows traders to open higher positions than the amount invested. Higher exposure leads to higher risk and sometimes the losses can even exceed the invested amount.
  • Unfair Practices by Broker: Brokers can indulge in malpractices for self-interest which can result in traders losing their investments. Choosing a well-regulated and experienced broker with positive reviews is important to mitigate this risk component.
  • Over Trading: Forex market is highly liquid and profit margin can manipulate the traders’ emotions. Sometimes your greed or fear of missing out can lead to investing more than you are willing to lose.

How can investors ensure their safety while investing in forex?
Traders must understand that there will always be an element of risk involved in forex trading. The risk can be reduced to some extent but can never be eliminated.

The following measures can be helpful in reducing the risks to the lowest levels.

  • Educate Yourself: “Investment in knowledge pays the best interest”. A successful trader must educate oneself to analyze the potential impact of any international activity concerning price movements of currency pairs. Traders must also be able to understand &execute an impactful fundamental and technical analysis of the currency pairs.
  • Trade with a Reputed Broker: Lesser fees and commission should not be the only aspect to select the broker. One must check the broker’s reputation in the market, positive reviews, and ensure it is well regulated. A broker that has been operational for a long term would be more promising over new, unregulated and lesser reviewed broker.
  • Use Safe Leverage: Use of leverage can surely increase the potential gains in a successful trade but it will also increase the risk factor at the same time. Some brokers offer a very high leverage ratio which looks attractive to many traders but it is quite risky. Any leverage ratio of higher than 10:1 is considered unsafe for traders.
  • Use of Risk Management Tools: Most of the reputed Forex brokers in Kenya offer risk management tools like stop loss, negative balance protection, limit order, etc. These tools can be used to reduce the risk factors and increase the probability of sustained profits.
  • Risk to Reward Ratio: It is a ratio that depicts the risk involved for a possible gain in a trade. The risk to reward ratio is different for every trade order and ideally should be more than 1:2.

Is Forex Trading for You?

New traders must understand that the Forex market is highly volatile and even after taking all the precautionary steps, there is no surety of positive returns and not a sure way to earn money. It involves high risk and might not be suitable for inexperienced traders. Nearly 60-70 percent of the traders lose money and the majority of them are beginners.

Those who cannot handle the volatility of currency pairs must opt for safer market alternatives like mutual funds, bonds, stocks, etc. which are comparatively less risky.

Nevertheless, Forex market is for you only if you are an experienced trader willing to take the risk in the foreign exchange market. A decent experience is required to get a grasp on the price movements of currency pairs, the market fundamentals, and the risks.

It is always advisable to gain trading experience using a demo account with virtual money until you are confident of making profits with the actual capital. Demo trading can also allow you to test your strategies, emotions, and suitability for actual Forex trading.

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Donald Trump blasts ‘fools’ who oppose good Russian ties

US President-elect Donald Trump has posted a progression of tweets censuring the individuals who contradict great relations with Russia as “‘dumb’ individuals, or nitwits”.

Mr Trump promised to work with Russia “to comprehend a portion of the numerous… squeezing issues and issues of the WORLD!”

His remarks came after an insight report said Russia’s leader had attempted to help a Trump race triumph.

Mr Trump said Democrats were to be faulted for “gross carelessness” in permitting their servers to be hacked.

In a progression of tweets on Saturday, Mr Trump said that having a decent association with Russia was “no terrible thing” and that “lone “idiotic” individuals, or simpletons, would believe that it is awful!”

He included that Russia would regard the US increasingly when he was president

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Bulls and Bears Took on More Currency Exposure in Week Through January

he most striking improvement among theoretical situating toward the finish of a year ago and the primary session of 2017 is not that modification were little. There was just a single gross theoretical position modification of more than 10k contracts. With sterling apparently not able to maintain even humble upticks, the bears added 13.1k contracts to the gross short position, lifting it to 120.2k contracts.

Or maybe, it is eminent that examiners for the most part added to positions, long and short, as opposed to close positions at the very end of the year. Examiners added to net long outside cash prospects positions, aside from in the Japanese yen and Swiss franc where 2.6k and 2.5k contracts were exchanged separately. Examiners likewise added to gross short positions. Here there was just a single exemption, the Japanese yen. Despite the fact that the dollar shut comprehensively higher in front of the end of the week, every one of the monetary forms we track here, spare the Mexican peso, picked up against the dollar in the three sessions since the finish of the CFTC reporting period.

Every once in a while it is helpful to review why many market members take a gander at the theoretical situating in the cash fates advertise. It is not that the outside trade is essentially a prospects showcase. It is principally an over-the-counter market in which every day turnover midpoints in abundance of $5 trillion a day.

Trade exchanged monetary forms and alternatives represented around 3% of the normal day by day turnover as indicated by the BIS study. Be that as it may, past reviews have discovered some contemporaneous connection between’s market heading and net position changes. We think it additionally offers knowledge into a specific market section of pattern supporters and energy brokers. It is not by any means the only device, yet one of a few data sources.

One ramifications of this is albeit theoretical positions in the money fates market are moderately extensive, it is still little contrasted and the money showcase. Along these lines, it is difficult to see the genuine essentialness of a record vast position, as though there is some market top. At some point, examiners are not driving the costs, possibly there is another fragment, national banks, enterprises, as well as genuine cash that is more essential at any given minute.

We invest some energy taking a gander at gross positions instead of just net theoretical positions, which is the more customary approach. We think a more granular look is frequently fundamental. There is a distinction between short-covering, for instance, and new purchasing, however it appears to be identical in the net. Additionally, the gross position is the place the introduction is not the net position. A net position of zero does not mean the market is nonpartisan. Net positions could be huge, which implies a short press or a negative stun could in any case troublesome. The positions that must be balanced are captured in the gross measure not the net figure.

We find numerous customers are likewise keen on theoretical situating in the US Treasuries and oil. The net and gross short theoretical Treasury position has swelled to new records. The bears added 23.8k contracts to the as of now record net short position, lifting it to 616.2k contracts. The bulls attempted to pick a base and added about 20k contracts to the gross long position, which now remains at 471.2k contracts. These modification prompted to a 3.8k contract increment in the net short position to 344.9k contracts.

The bulls delayed in the oil prospects toward the finish of 2016. They exchanged short of what one thousand contracts, leaving 608.1k gross in length contracts. The bears added 4.1k contracts to the gross short position, giving them 168k. These conformities trimmed the net long position by very nearly 5k contracts to 440.1k.

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3 ways to profit in the ‘year of the dollar’

In December, the Federal Reserve raised loan fees for the second time since the Great Recession and included the desire of a 2017 financing cost climb to its gauge. Furthermore, only a couple days prior, the abundantly anticipated minutes from the most recent Fed meeting demonstrated the most hawkish tone from the national bank in two years.

In the meantime, Europe has been dove into political turmoil after a year ago’s Brexit vote and the later abdication of Italy’s leader. Somewhere else, the Bank of Japan proceeds down the way of negative rates and forceful security purchasing.

Put it all together, and it isn’t astounding that the U.S. Dollar Index is up against 14-year highs.

Speculators may have missed so much discussion on account of babble about the Dow Jones Industrial Average at the end of the day almost hitting 20,000. Be that as it may, paying little respect to your assignment to stocks or your venture skyline, this sort of huge picture incline in the dollar implies right now is an ideal opportunity to position your portfolio to benefit and, maybe most critical, to keep away from a portion of the pitfalls that can originate from a solid local cash.

Here are a couple ideas dollar exchanges ought to consider:

Residential plays over multinationals

There’s a considerable measure of seek after shopper stocks in 2017 on account of an enhancing work market and any desires for a jolt under a GOP-controlled Congress and President Donald Trump. In any case, remember that not all retailers are made equivalent especially those with abroad operations that are adversely affected by the wide dissimilarity in monetary standards at this moment.

For example, retailer Wal-Mart Stores Inc.(WMT) said troublesome money trade rates shaved very nearly 2.5% off profit for each partake in the second quarter of 2016. On the other hand consider that in the monetary final quarter of 2016, athletic attire goliath Nike Inc.(NKE) saw its income development cut down the middle because of forex weights, from 12% year-over-year in consistent cash measures to only 6% including real money changes.

To take advantage of the “reflation” exchange that numerous financial specialists are counts on in 2017, you need to represent the headwinds that a solid dollar are making for multinationals at this moment. The most ideal approach to do that is to consider customer plays that do by far most of their business here in the U.S. – for example, Foot Locker Inc.(FL), which has been an uncommon splendid spot in retail throughout the most recent couple of years.

Supported money ETFs

Obviously, in the event that you need a steady portfolio, you can’t just purchase just local centered values. Geographic expansion is similarly as imperative as enhancement crosswise over parts and resource classes. Such a large number of financial specialists keep on holding worldwide plays in light of a legitimate concern for a balanced portfolio, regardless of the possibility that it implies battling a daunting struggle as a result of a solid dollar.

The uplifting news, notwithstanding, is that you don’t need to leave yourself to torment through a solid dollar and a powerless euro when you put resources into Europe. Nor do you need to stress over the yen-dollar conversion standard when you put resources into Japan. That is on account of there’s an entire group of cash supported ETFs to permit financial specialists to put their cash in outside business sectors yet keep away from forex issues.

Consider that Japan’s Nikkei 225 file is up around 25% from its July 2016 lows. The WisdomTree Japan Hedged Equity Fund(DXJ) is up 35% in a similar period on account of assurance from forex issues and a somewhat better-performing rundown of stocks – while the non-supported iShares MSCI Japan ETF(EWJ) is up only 10% in a similar period because of battling a difficult task against a solid dollar.

In the event that you need to differentiate your portfolio comprehensively, you ought to consider supported assets that incorporate the Japan-centered DXJ, the WisdomTree Europe Hedged Equity Fund(HEDJ) to play Europe or the iShares money Hedged MSCI EAFE ETF (HEFA) for developing markets.

Dollar list ETF

In the event that you are searching for an immediate play on a rising dollar as opposed to putting resources into stocks, figuring out how to exchange remote trade can appear like an overwhelming undertaking. Gratefully, there’s the PowerShares DB US Dollar Index Bullish Fund(UUP).

This ETF is attached to the U.S. Dollar Index, which is a measure of the greenback against a wicker container of other worldwide monetary standards including the yen and the euro. It’s a straight money play, however that doesn’t make it straightforward or hazard free. In the event that the dollar debilitates, you’ll lose cash similarly as though you’re putting resources into a stock that has fallen on difficult circumstances. Furthermore, obviously, PowerShares takes a little cut of your speculations en route that indicates 0.8% yearly, or $80 a year on each $10,000 contributed.

Still, in the event that you need to conjecture on the dollar or support against a solid U.S. cash keeping down other worldwide ventures on your rundown, it’s maybe the least demanding approach to do as such for generally financial specialists.

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