How to Start Forex Trading? – FX Guide
The foreign exchange market is one of the world’s largest and most active, with a turnover of trillions of dollars each year. Many Kenyan traders make hundreds of millions of dollars a year on this platform. As a result, the number of newcomers to Forex is growing every day in Kenya, hoping to get rich quickly.
However, do you know how to start forex trading? Forex trading is not an easy business in Kenya, which is why newbies need to learn a few things before investing money. For first-time traders, we have summarised a few key points and rules in this article. By following them, you will avoid mistakes, avoid disappointments, and can probably earn more money.
How does forex trading work?
The minimum investment to begin trading Forex in Kenya is $5. The investment will, however, not produce satisfactory results. Therefore, if you want to earn good returns, you must invest sufficient capital, such as $250. A small amount of trading will force you to take more risky trades where possible losses could occur.
Having obtained capital, the next step is to identify a reputable forex broker. In Kenya and abroad, there is a wide variety of online forex brokers to choose from. It is important to make sure your broker is registered with the Capital Markets Authority or a similarly regulated organisation, is reliable and trustworthy.
Set up a Demo account. If you plan to invest in Forex, you cannot do so without opening a demo account. The majority of online forex traders in Kenya allow you to open a demo account. As soon as you master the art, you can go ahead and use a real account.
Create your trading account and deposit funds. Make sure you use an online forex broker that you can trust. Many brokers, including LiteForex, XM, and HotForex, offer Mpesa withdrawals and fund transfers.
Example of how Forex trading works
Kenyan shillings are generally coded with the letter KES and are divided into 100 units called cents. Kenya’s Central Bank issues Kenyan shillings.
Consider that the dollar and shilling exchange rate in Kenya is 103.6. This is equal to buying 1000 dollars worth of Kenyan shillings. This calculation assumes that the exchange rate rose to 104.6, so you would have earned a profit.
1000 USD X (104.6 – 103.6 KES/USD) = 1000 KES
If, however, the exchange rate at 102.6 dropped, you would have lost money. Below is how the loss would have been calculated.
1000 USD X (102.6 – 103.6 KES/USD) = -1000 KES
Learn Forex language
To begin your journey, you must become familiar with the terminology of the Forex market in Kenya. Firstly, you should learn the fundamentals, abbreviations, and specific terminology of Forex before you start trading.
Once you have mastered the terminology, you can read books about Forex or watch free video tutorials, which will assist you in understanding concepts, market participants, and fundamental mechanisms. As soon as you become familiar with the basics, you can determine whether Forex is something you are interested in.
Choose reliable broker
Trading forex in Kenya requires choosing a trustworthy broker before you can begin. A company of this type provides you with a range of financial services and facilitates transactions. Maintaining your financial security and avoiding financial losses can be done in part by working with a reputable broker.
Research thoroughly and read reviews of a variety of brokers before you choose one. Forex trading isn’t offered by all companies, so check before you open an account if you can do it.
Analyse global economy
Currency trading involves accurately anticipating the movements of the world economy to make money. To become a successful trader in Kenya, you must know global economic trends and know how to convert, buy, and sell currencies on favourable terms. If you are thinking about purchasing currencies from other countries, you should research their trading positions, GDP, and political climates.
Try EA robot assistance
If you don’t want to trade alone or want to minimise your risks, you can find lists of the Best Forex EA robots online. It will tell you which deals are most profitable based on the market’s conditions around the clock.
In addition, Forex EAs in Kenya are capable of managing your money independently and bringing steady earnings. Traders who wish to automate some processes will take advantage of this option, whether they are newcomers or experienced traders.
It is important to recognise that even the most intelligent expert advisor is just a supplement to your knowledge and skill set.
Rules for a successful start
1. Practise with a demo account
Before investing real money, you should practice on a demo account for several weeks in Kenya. You will be able to master different trading strategies and learn how to deal with the complexities of the market. You can only start investing your own money if you trade on the simulator and get a stable positive result.
2. Create your strategy
The biggest mistake in trading is to repeat someone’s orders. If you copy actions without understanding the logic, there is no possibility to assess the situation correctly. You can get stuck with the entrance or not make an immediate exit from the position. This results in the loss of money. It is much more reliable to create your trading strategy while training on the demo account.
3. Start trading with small orders
Trades with large amounts require a certain frame of mind, psychology, and a certain level of knowledge and skill. Some people cannot start earning money on such a high level from their first days on the platform in Kenya. Make sure you avoid making mistakes from the start. Investing a few hundred dollars will be enough for you to start earning.
Best tips to start forex trading
As a reminder, the Bank for International Settlements, which collects data on forex liquidity, is a good resource for assessing the size of the global interbank market. However, investors who are not institutions, such as retail investors, do not directly trade in the interbank market. As a result, retail investors trade with a Registered Foreign Exchange Dealer, who serves as their counterparty for all transactions. Here are a few tips to start profitable trading in Kenya
1. Discover what makes Forex different
Foreign exchange is a market in Kenya where currencies are traded, including the US Dollar, the Euro, and the British Pound. The exchange rate of every currency is based on the value of another currency. Therefore, every tradeable currency is quoted as a pair, such as EUR/USD and GBP/USD. Usually, the amounts quoted in pairs indicate how much of the first currency is needed to buy the second, such as EUR/USD quoted at 1.1810, which means that 1 Euro is worth 1.18 dollars. Unlike traditional stock markets, the forex market operates around the clock, five days a week. With Forex, traders can set their schedules and apply different skills and techniques to find success.
2. Learn different ways to trade Forex
A trader can use a variety of styles to trade forex markets in Kenya. In selecting the best trading strategy, you should consider the time you plan to devote to trading, the amount of information you have about economic trends, and your time horizon for trading. This article outlines eight different types of forex trading strategies.
3. Can I start forex trading by myself?
To trade Forex by yourself, you will have to become familiar with your psychological makeup. Trading based on a well-defined strategy and putting your emotions aside can increase your chances of success.
4. Is $10 enough to start forex trading
The currency market in Kenya can be entered with a minimum deposit of $10. However, contrary to what you might have read online, forex trading is not a get-rich-quick scheme. Rather than how good the strategy is, the amount earned depends more on the risk being taken. An old saying states that making money requires money, and the same is true with forex trading. Deposits can be lost in forex trading.
5. Avoid common trading mistakes
Traders in Kenya can often be right about the direction of a market, but they often fail to calculate how much profit they make when they are right versus how much money they lose when they are wrong. As a rule of thumb, traders tend to make less money on winning trades than losing trades. The mistake is one of the most common ones.
6. Understand what moves markets
The forex market in Kenya is affected by major economic data. Most traders are looking for this volatility when making decisions. They find that news releases have a strong tendency to affect the forex market. A forex trader is likely to pay attention to news about economic data releases such as GDP and inflation since these releases are usually considered to be of ‘high importance.’
7. Watch winning traders for tools and techniques
Those who want to become forex traders should follow the strategies of successful traders in Kenya. Several traders in Kenya recommend Market Wizards as a good read. A free webinar by a top trader can also be an effective way to learn how winners operate in the market and to discover new insights. The daily live webinars we offer are tailored to beginners and those with significant experience trading forex who wish to enhance their knowledge of specific technical analysis topics.
How and when to buy or sell in Forex trading?
Each trader has their style and approach when buying and selling Forex in Kenya. Due to its size and liquidity, the forex market is one of the most liquid and diverse markets globally, and there is no one method of trading the currency.
To know when to buy and sell Forex, you have to consider many factors, but there is typically more volume when markets are volatile because there is more risk associated. Using practical examples and additional resources, this article will help you learn how to trade currencies on the forex market.
What does it mean to buy and sell Forex?
In forex trading, it is necessary to estimate the appreciation/depreciation of one currency concerning another. The basis for the trade can entail fundamental or technical analysis. After forming a solid foundation, the trader can turn to other technical and fundamental factors. The following levels of entry and exit will be followed, taking into account risk management principles.
Factors that affect currency pairs
A currency’s value in Kenya can fluctuate with the state of the government, corruption, and changes in government – for instance, the Dollar surged in price when President Donald Trump was elected!
For forex traders, unemployment, GDP, monetary and fiscal policies (to name a few) play an important role in determining currency value from a fundamental standpoint. Our economic calendar allows us to stay on top of important events affecting Kenya’s currency values.
To form a basis for their forex trades, technical traders usually use key price levels (support & resistance) and trends.
Understanding risk management when buying and selling Forex
To stay in the forex market for a long time, risk management is critical. The risk/reward ratio should not be the only thing considered, but the volatility swings that can occur.
The factors affecting forex pairs in Kenya can have significant effects at times, so by implementing risk management techniques, you’ll be able to eliminate adverse effects on your trades. Trading forex can be complex, which is why learning how to read currency pairs before engaging in trade is essential
Learning all the specifics of the market is crucial to begin your trading career. Often, novice traders open orders for large sums of money and engage in risky deals. Unfortunately, these strategies usually end in disappointment. Therefore, newcomers should never let their emotions take over and constantly learn new strategies. You can only master Forex trading through constant practice.
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Heinrich is a forex and CFD enthusiast with a passion for writing good informative quality content. He strives to showcase the best forex brokers in Africa. Join him on his Journey!
Content Writer | Market Analyst
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