Forex Trade – FX Guide

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Kenya is experiencing rapid growth in forex trading. This can be a positive sign for traders. The global expansion of forex trade has many benefits for forex brokers and banks. The convenience and accessibility of forex trading contribute to its rapid expansion. The reasons why Forex is gaining popularity across Kenya are discussed in this article.

Definition of Forex trading

In forex trading, a currency is exchanged for another to take advantage of fluctuations in relative value. There are trillions of dollars traded between international currencies on the forex market every day, making it larger than the stock market.

Business activities include purchasing one currency on the expectation that it will appreciate against other currencies or selling one currency assuming that it will depreciate against other currencies such as Bitcoin and Ethereum.

Forex traders in Kenya should keep in mind there are risks associated with it; however, they can still make profits since the prices are more volatile than stocks, and they change relatively quickly.

Forex is an international market

The forex market is indeed an international one. A forex dealer or day trader does not have to operate on the foreign exchange markets in their own country but can trade anywhere in the world.

As more people recognise Forex as an excellent investment or currency converter package, the forex industry has been steadily increasing for years. This could be your main source of potential clients if you are looking for investors who already invest in foreign currencies. A sound forex trading strategy can help you succeed. It’s just like any other business.

What are Forex traders doing?

Amazed businessman using laptop and pointing on it in office

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It is one of the most exciting markets to trade in because forex traders do many things daily. For each pair that a trader wants to trade, the trader must analyse the currency data before taking any positions.

The combination of overall sentiment with technical analysis based on chart patterns and momentum indicators is included. Your forex broker may handle executing trades, but some investors prefer to use a platform such as MetaTrader to execute their orders manually.

While you’re working with an international team, you might also have to coordinate updates between forex traders and forex brokers across different time zones or provide assistance to forex clients with strategy or execution.

Currently, this Kenyan FX market is spreading throughout the world, and it isn’t planning to slow down anytime soon. FSCA forex brokers in South Africa and CMA forex brokers in Kenya became the latest expansion, and the company will continue to expand every year. Participating in this game has become more appealing than ever before.

The FX market has grown exponentially in the last decade

Trading forex has grown exponentially over the past decade. Forex markets were worth about $US48 trillion in 2008, but now they are worth close to $US80 trillion, which represents a growth of over 50%.

According to analysts’ estimates, the forex industry is predicted to grow by 33% by 2020, with more growth to come. In the forex industry as a whole, more than 400 thousand employees are working in a variety of sectors (e.g., retail sales, information technology, finance), so further expansion of the industry could result in the creation of more than 250 thousand new jobs over those next five years.

It is a global industry gaining $5 trillion as a daily turnover

Over the last few years, the forex market has been revolutionised worldwide. The forex market is a daily form of trading currencies between people across the globe to make money from fluctuations in exchange rates.

A forex trader is usually a professional who trades Forex as their primary profession. The amount of forex volume traded electronically through computers (automated forex trading) may reach up to 80%.

There is a substantial risk of failure involved in forecasting currency rate movements. Successful forex traders can earn more than $300 per hour or even more depending on how much one is willing to invest.

From Sunday night until Friday afternoon, the markets are open 24 hours a day. Investing in Forex is a global investment opportunity available to all types and sizes of individuals, funds, and organisations who wish to become part of the international markets and hedge their currency risk.

How does Forex trading work?

It’s time for you to learn how forex trading works. Forex traders are constantly monitoring a particular currency pair on their computers

A trader can purchase these currencies from them at a price. Individuals can then decide whether they want to purchase currencies from the broker with their own money. In such a case, he will issue an order stating his willingness to spend foreign currency.

Depending on the broker’s decision, the trade can either be accepted (in which case it’s called “taking”) or rejected (it’s called “nixing”). The deal becomes a “live deal” when a broker accepts it. You will know when your order goes through because forex trades are completed in real-time.

You can also trade on foreign exchange if you are a forex trader. Here, they are trading currency pairs with people from around the same time (usually from the same country) that are also involved in the forex market

Beginners guide to forex trading

The most successful traders clearly understand the markets and follow Forex and economic news releases, just like any other form of speculation or investing. Gain knowledge of how currency pairs trade on the Forex market, how to price fluctuation affects currencies, and what factors influence their value.

Know the risk

It is possible to make money with Forex, but it is also possible to lose money. Price movements can be difficult to predict because many factors influence currency values, including interest rates, inflation, and geopolitical risks.

Practise currency trading

For FX trading, investors can find platforms that offer practise accounts. Paper trading is another term for trading in a practice environment. An individual may open a real forex account once they become more comfortable and understand the market.

Know your limits

If you’ve done your research and begun forex trading, you need to know what level of risk you are comfortable taking. A good rule of thumb is never to risk more than you’re willing to lose. Investors will also be limited in their leverage (the amount of borrowed money) in currency trading under current regulations.

Protect against the downside

Put stop or limit orders into action to get out of the market at a price you determine ahead of time. A stop order can help you to limit your losses.

Get started with Forex

A forex trader would need a forex broker and a trading account once they have established their currency trading knowledge.

CMA Regulatory requirements require Kenyan forex brokers to collect information about you, such as your name, address, Social Security number, and country of citizenship. Although Forex is a decentralised market, financial institutions and brokers are protected by regulations and compliance.

Forex terminology

It would help if you familiarise yourself with some key trading terminology before getting started with forex trading:

Forex account types: Depending on how many trades you plan to make, there are three types of forex accounts. You can choose from micro forex accounts with a trading limit of $1,000, mini forex accounts with a trading limit of $10,000, or standard forex accounts with a trading limit of $100,000. Institutions can trade tens of millions or even hundreds of millions of dollars, far exceeding the limits on individual forex accounts.

Currency pairs: Trades are made on the forex market through currency pairs. When two currencies are bought as a pair, one is the base currency, and the other is the quote currency. Currency pairs like EUR/USD, in which traders buy Euros for dollars, are common.

Leverage: Leverage for forex trading is an example of leveraging borrowed money for a greater return. Going in the right direction can result in significant gains, whereas trades going in the wrong direction will result in significant losses.

Spread: The spread between a trade’s bid and ask prices is the forex spread.

Arbitrage: In arbitrage, excess profits are risk-free. The foreign exchange market occasionally allows cross-currency arbitrage. A spot FX trade and a forward FX trade would need to be booked oppositely, with the purchased currency invested during this period to capture any arbitrage. A return from investing in the originating currency may be higher than investing in foreign currency.

Making money with Forex in Kenya

Developing a profitable trading strategy that can be incorporated into a sound trading plan is the key to making money in the forex market from Kenya (or anywhere else around the world, for that matter). Traders who are new to trading can skip developing a trading plan and instead copy the trades of successful traders on social trading platforms.

Developing your trading plan is a great way to increase your chances of forex trading success, but its success will depend heavily on the performance of your strategy and your ability to follow it within the overall scope of your trading plan. No matter whether you prefer to trade trends for long-term profits or scalp the market intraday, any successful strategy can be incorporated into a trading plan.

A solid trading strategy should incorporate objective trading criteria, prudent risk management strategies, and disciplined money management practices into a realistic and implementable plan you can realistically implement.

It would be best to remember that many strategies may seem to work at first, but eventually, they can be rather ineffective due to changing market conditions.

Is trading Forex in Kenya right for you?

Forex trading requires a thorough knowledge of the market in question, a viable trading strategy, and the discipline to adhere to your overall trading plans unless you decide to use social trading platforms. You stand a better chance of succeeding as a forex trader if all of those requirements are met. Trading forex from Kenya requires you to use a reputable and well-regulated broker.

Pros and Cons of Forex trade

Pros and Cons - Balance Concept

Starting on Forex is relatively easy, but it’s important to understand what forex trading has to offer.

Pros of Forex trade

Easy access: Besides being Kenya’s largest financial market, the forex market may also be the most accessible. The broker determines the minimum deposit needed to open a forex account, but traders all over the country can open accounts with as little as $1.

Low trading costs: Forex’s trading costs are generally lower than those for stock trading, especially for major currency pairs and narrow spreads.

Quick profits: In most cases, forex brokers allow you to quickly access and convert profits into cash, making withdrawals available right away.

Use of leverage: When compared to stock traders, who can only borrow money at a 2:1 ratio, forex traders can borrow at a 50:1 ratio. While the potential for greater profits increases, the risk of losses does as well.

Flexible market hours: 24 hours per day, five days per week in the FX market, which is a huge advantage over the stock market, which is only open five days a week, excluding national holidays.

Liquidity: Generally, FX markets are highly liquid because there are many traders, especially among major currencies. Since spreads are tighter, currency trading can be conducted at a competitive price.

Cons of Forex trading

Complexity: Multiple macroeconomic events worldwide can affect the FX market, consisting of many national currencies.

Fair value estimations: It can be very challenging to estimate a currency’s fair value compared to the valuation of stocks, which is usually determined by visible company fundamentals.

Volatility: The currency trader can benefit from fluctuations in currency prices, but these fluctuations may entail additional risk for the forex trader. By using leverage, the trader is even more exposed to risk.

Bottom line

It can be easy to get started in forex trading in Kenya, and it can be profitable. Traders, however, face high risks and price volatility as well as a steep learning curve. Kenyan  Forex traders need the ability and willingness to take risks, acquire new strategies, and monitor market conditions frequently.

There’s no doubt that forex trading is here to stay, and it’s only getting bigger and bigger. There are almost always new entrants to this very profitable market. Since it’s a global market, those who are educated in this field have a great chance of success and enormous wealth. If you’re interested in learning a new profession, this may be the right choice for you.

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