Welcome to the fascinating world of foreign exchange trading! Hundreds of thousands of people have been attracted to this popular investment activity over the past decade. Read on to learn more about this form of trading.
Success in any investment endeavour is dependent on three key factors: knowledge, experience, and the ability to control one’s emotions. By making this first step in building awareness of all things to do with foreign exchange (or ‘forex’ if you want to speak the lingo), you are already making headway on the first requirement.
Make no mistake about it, forex trading is known to have a high-risk profile, which means that there is a high potential for reward but also a high potential for loss. As with other high-risk investment vehicles such as options or futures contracts, forex trading requires specialised training and practice time on what is called a ‘demo trading account’. This will allow you to acquire the confidence and level of consistency needed to win in the topsy-turvy world of foreign exchange.
Unfortunately, many people have been drawn to forex trading because they mistakenly believed it was a new form of online legalised gambling. These individuals did not take the time to prepare and soon became one of the many casualties in this field. Casualty rates can run as high as 70% to 90% and higher. Be wise. Invest time in practising, and you will reap dividends down the road.
How does one achieve success in this field? One term that will help you achieve your goals is ‘pip’, which is used often in the forex arena. Pip is an anagram for ‘percentage in point’. All currency pairs have a standard quote format with a specific number of decimal points. The number of decimal points may range from two to four, but a pip is slang for the last decimal point digit. If a quote to buy euros with US dollars is $1.1379, and it drops to $1.1369, it dropped 10 pips.
For now, let ‘pips’ represent Preparation, Information, Practice, and Strategy:
- Preparation: Awareness is key to building a solid knowledge foundation. Once built, all other training can then produce effective results. There are many websites, videos and books devoted to this subject matter. The more acquainted and familiar you become, the more positive your trading experience. As with any other performance-driven activity in life, the best advice for a newcomer is to accept your ‘amateur’ status and learn from a mentor. Several articles on this website will teach you the ropes, advise you on how to select a broker, avoid fraud and scammers, and how to wisely use leverage and attempt to make money at this craft.
- Information: You must be able to access and assimilate a lot of information from various sources to develop your daily action plans. Anything that affects currency price behaviour is regarded as ‘fundamental’. Technical analysis will assist you in analysing mountains of data and become your best friend. It is the study of chart information on previous pricing behaviour to forecast the future direction of currency rates. It will become your guide to finding profitable trades.
- Practice: There is no substitute for experience. It will help if you put in the time. ‘Free’ virtual demo trading accounts were created with this purpose in mind. Practice on the demo account provided before putting any real money at risk. The two primary reasons why many beginners fail at forex trading are impatience and inexperience. Many forex ‘gunslingers’ jump headlong into the market and sometimes crash and burn. Practice forming a strategy, executing trade orders, protecting against the risk of loss, and securing your gains. Veteran traders swear by their practice regimen. You will also!
- Strategy: You must develop a disciplined approach to the forex market, execute by the numbers for buys and sells, and prevent your emotions from interfering with the process. You can be your own worst enemy if you do not follow a fixed routine. Study the topic and choose a trading style that mirrors your personality. It is also wise advice for beginners to focus on only one currency pair at first and not risk more money than you are prepared to lose. If you feel that your psyche is not up to the task, you might want to consider following the trades of an expert, or what is called ‘copy trading’.
Why Trade Forex in Kenya?
Preceding the COVID-19 pandemic, Kenya had one of Africa’s fastest-growing and most stable economies. GDP grew at an average annual rate of 5.7% from 2015 through 2019. Although growth was stymied in 2020, Kenya is currently making an economic recovery. Prosperity, stability, and favourable outlooks for the future have encouraged many investors in Kenya to take an interest in forex trading.
To date, it is estimated that over 90,000 citizens are actively engaged in online forex trading in Kenya, and this number is growing. Many have found this activity stimulating and profitable while spending more time at home. Forex trading is not for everyone, but there are many ways to enjoy it. Day trading, swing trading and copy trading are just three possibilities.
Who Regulates Forex Trading in Kenya?
It is legal to trade foreign exchange pairs in Kenya. The Capital Markets Authority of Kenya (CMA) has regulatory oversight responsibility and the mission of licensing and regulating brokers while protecting consumers against fraudulent bad actors in the field.
How to Start Forex Trading in Kenya – a Step-By-Step Guide
Experienced forex traders may not need guidance, but these five steps are primarily meant to assist with how to start forex trading in Kenya for beginners. Even after preparation and gathering information about the world of forex trading, accept that you are at the beginning of a long journey. Patience is a winning attribute, especially when putting real money on the line in the world’s largest financial market, known for behaving erratically at times.
- Choose a Broker: After preparation, your first task is to find your business partner, an online forex broker. Safety and security are paramount but do not look for shortcuts. Take your time. Large brokers such as IG Group are well respected, but you may want a local or smaller broker to serve your interests. At ForexTraders.com, we have compiled a list of some recommended brokers to consider.
- Open and Fund an Account: Make sure that you choose a broker with a free demo account for practice. Practice time is critical to gain familiarity with the broker’s platform. Learn the various order options and how to open and close a position, deploy technical indicators, test your strategy, and lastly, how to make money. Opening an account will also require submitting personal identity information in compliance with international law. Once approved, the broker will ask you to fund your account. Start small, and once you feel comfortable, consider increasing your account balance.
- Make Your First Trade: Your goal is to find favourable trading situations where the odds favour you. Technical indicators are your best tools for finding these optimum set-ups. To win at forex, you need an edge, and indicators can create one. One simple strategy involves following two moving averages for different periods. When they cross over one another, the odds may favour pricing behaviour moving in a specific direction. Practice your strategy on your demo system.
- Manage Your Risk: It is prudent to adhere to wise risk management principles to ensure that you can trade another day, even after sustaining a losing streak. There are rules for protecting your downside, ensuring that profits are realised, and determining an appropriate size for your position. Practice these rules and strategies, and employ them.
- Enjoy Your Profits: There is a psychology to trading, and part of it is to accept losses when they occur and to move on. Every trader has losing trades. Your goal, however, is to have a ‘net’ gain for your trading experience and to enjoy it. Not everyone is meant to be a trader, but the odds will favour you if you follow a good strategy consistently.
The Best Forex Brokers in Kenya
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In Kenya, foreign exchange trading has increased in popularity over the past decade. To avoid becoming an early casualty, it is highly recommended that you invest the time upfront, develop and practice a winning strategy before you risk real capital, and then have patience. Pick your moments of attack. If you miss one opportunity, remember that there is another one just around the corner. It is the nature of this fascinating market.
Forextraders' Broker of the Month
BlackBull Markets is a reliable and well-respected trading platform that provides its customers with high-quality access to a wide range of asset groups. The broker is headquartered in New Zealand which explains why it has flown under the radar for a few years but it is a great broker that is now building a global following. The BlackBull Markets site is intuitive and easy to use, making it an ideal choice for beginners.