Kenya is increasing in size in terms of its population and economy. According to The World Bank, Kenya has achieved an impressive average growth rate of 4.8% per year from 2015 to 2019. As the economy expands Financial trading and investing is becoming increasingly popular.
Forex trading is regulated by the Capital Markets Authority (CMA) in Kenya. The regulator is responsible for licensing and supervising Forex brokers to ensure their compliance with the country’s regulations. The regulations are in place to protect the interests of Kenyan residents.
Currency trading is especially popular among young Kenians as the young are more tech-savvy and are looking for ways to create a stream of income. In recent years the number of Forex brokers have skyrocketed and it’s become super easy to open trading accounts due to low legal and financial barriers to entry.
According to the Capital Markets Authority of Kenya, online FX trading Kenya trading volume within the country has increased from 1.5 trillion Kenyan Shillings (USD 13.8 billion) in 2019 to 1.9 trillion Kenyan Shillings (USD 17.5 billion). And the number of traders has also increased from 7,000 individuals in 2016 to more than 70,000 registered traders by 2020.
Forex trading offers many advantages and can definitely be a profitable endeavor for many individuals. However, it can also be costly and lead to huge losses for traders that are ill-prepared for the challenge.
Ways to make money online by trading Forex
Currency trading offers many opportunities to make money trading FX in Kenya. Here are some ways to make money online by trading Forex:
- Trade FX yourself: You can start trading by simply opening a live trading account with a reputable broker. Barriers to trading are very low. Most brokers have below 200 USD minimum initial deposit requirements and very little documentation is needed.
- Copy trade: one more way to make money online is through copying other successful traders. Modern trading platforms enable traders to automatically replicate trading decisions. Copy trading comes with its benefits and drawbacks. When copy-trading, you don’t need trading experience and you can pick the trader that best suits your requirements to copy. On the downside, copy trading services cost money and you become entirely dependent on decisions made by other people. It’s important to note that copy trading is not a guaranteed way to make money and carries its own risks.
- Trade using Forex signals: FX trading profits in Kenya can be not only made by trading, but also by selling signals to other traders. Forex signal services provide trading signals to subscribers, indicating when to place a buy order, sell order, stop loss and take profit on a certain currency pair. Typically these signals are sent over email or social media. While using these signals can be helpful, there are several downsides to take into account: firstly, you become dependent on your signal provider and lose control on decision making. In addition, execution is delayed and typically signal providers try to find trading opportunities on larger than hourly candle charts. Moreover, trading signals are costly and they also might be false sometimes, as there are no guarantees in currency price predictions.
- Trade using managed accounts: managed currency trading accounts allow investors to hand over the management of their accounts to a professional trader. The trader will place trading orders on behalf of the investor, and profits will be split between the investor and the manager. It should be noted that finding a good account manager is not easy. It’s important to do your due diligence and select a reputable manager with a proven track record. In investing, managers that can manage drawdowns well and gradually increase their account balance are highly valued.
How to trade currency pairs profitably
Most people start trading because they believe it’s an easy way to make money, while the opposite is true. Forex money trading Kenya can become highly profitable for many individuals, on the other hand, many people can lose their entire savings if they are not ready. Here are some of the key factors to consider for trading profitably:
- Create clear goals: firstly, you need to have a proper understanding of what trading is and create realistic expectations accordingly. Have daily, monthly and longer goals. If you are planning to remain in the business for a long time, it’s important to learn how to manage drawdowns and create a good risk management strategy.
- Build a trading system that will help you achieve your goal. There are a million ways to make money in the markets, unfortunately, all of them are difficult to find. Once you have your realistic goal in place, for instance to double your trading balance every 2 years, you can start working on a plan to achieve it. Investors often use a “Rule of 72” formula to calculate the time needed to double the investment. T=72/r where T is the number of years it will take for the investment to double and r is the annual rate of return, expressed as a percentage. In order to double an investment in 2 years, 41.42 annual growth rate is needed. To double in 3 years, you only need to increase your account every year for 25.99%. When profits are reinvested, returns can grow exponentially. This phenomenon is known as compounding in investing.
- Learn how to manage your risks and emotions. Avoid being greedy and work hard to build confidence in your trading system. Confidence is built by testing, backtesting and upgrading trading strategies. Never risk more money per trade than you can afford to lose. Stop trading for a day or two when you feel the urge to revenge trade after a losing order.
- Keep track of your trading performance by having a trading journal. Trading journal helps both professionals and novice traders to find flaws in their trading and work on improving their weaknesses. Trading journals include information about reasons for opening a trade, reasons for closing it, take profit and stop loss targets, etc. In addition, you should also include how you feel before making a trade. For example, if you trade when you are tired and have unsatisfactory returns, the trading journal can reveal that.
- Work hard on finding an edge. A trading edge is a unique advantage or an approach that gives traders an edge in the market. When you have an edge and manage your risks well, account growth gradually is almost inevitable. Trading process itself should not be difficult. The bulk of work is done during the preparation phase. Successful trading involves planning trades and trading the plans. It should be mentioned that trading conditions are subject to change. And as a trader, you need to stay up to date and tweak your system every now and then for better results.
- Learn about your trading instruments. Currency pairs are influenced by various factors, such as economic and political. It’s critical to understand how they work to be able to better predict future prices. For instance, when inflation is high (Consumer Price Index), central banks are trying to limit money printing by increasing the interest rates, which is good for the currency short term, but damages the economy long term as businesses suffer. Every economic and political event is linked to one another and you need to be able to see how each event might impact any given currency. For instance, Kenya currency trading involves understanding the trade balance of Kenya with other countries, investments and macroeconomic indicators, as Kenyan Shilling is impacted by internal and external factors, such as global inflation, money transactions from Kenyans living abroad to their country, etc.
- Don’t be afraid to try different trading styles when starting out trading. It’s never a good idea to invest a lot of money into trading while you are still a beginner. Most beginners need to try various trading styles to find what works best for them. There are many trader types to choose from, including: day trading, scalping, news trading, swing trading, position trading, algorithmic trading and high frequency trading. Some traders trade breakouts, while others range trade. In addition to currency pairs, you can try different asset classes as well, such as indices, commodities, crypto currencies, and CFDs (Contracts for Difference) on stocks.
Currency trading in Kenya is becoming increasingly popular every year. Kenya Forex market profits many individuals. On the other hand, they can be risky for others. There are various ways to make money online trading Forex, including: retail forex trading by yourself, using trading signals, copy trading, and trading using managed accounts. Each of these methods have their pros and cons. In order to trade profitably in the Forex market, there are a couple of things to take into consideration, such as having short, medium and long term goals, building a trading system, managing risks and emotions, finding an edge, and keeping educating yourself about different trading instruments.
FAQs on how make money online in Kenya with Forex trading
Is Forex trading profitable in Kenya?
FX trading Kenya profitability depends on various factors. Traders differ in terms of level of experience, risk tolerance trading strategies, and overall skill sets. Many traders lose money trading financial markets, however, many manage to turn trading into profitable business.
What do I need to make money trading Forex in Kenya?
It’s not easy to make money from trading FX in Kenya. Traders need to develop profitable trading strategies and manage their risks so that these strategies can work over the long run. It’s important to be a hard-worker and keep coping with the changing trading conditions. In addition, you will need an upfront capital to invest in your education, trading office and make a deposit.
How to trade Forex profitably in Kenya?
Forex trading profitability in Kenya is possible if you work hard and develop a good trading plan. When you have a plan trading becomes easy, because hard decisions are made by following trading rules and not by second guessing yourself. To trade profitable, it’s best to test your trading strategies on demo accounts and when you develop confidence in your systems, move towards live trading.