Trading Forex can promise great returns when trading from developing countries as more and more regulated brokers are offering better trading conditions for traders with small budgets. In later times, Forex trading is becoming increasingly popular in Kenya and there is a reason. As smartphones become more popular it is easier to access the internet and start trading international currency markets. In this guide, we are going to explain how to start Forex trading in Kenya and what are necessary steps to make consistent profits while being on a small budget.
Understanding Forex Trading in Kenya
Kenya is a developing country with a modest-size economy. With 16% of its population living under international poverty levels, it seems a very attractive idea to master Forex trading and make a living while spending much less time analyzing markets than for a 9-5 job. What’s more exciting is that many well-established brokers have introduced various new account types with super low initial deposit requirements making Forex trading available for traders with a budget of 1 dollar. If you live in and want to learn Forex trading in Kenya and how to become successful without leaving your house then read everything in this guide very carefully.
Basics of Forex trading
To begin trading Forex in Kenya, let’s try and dig into the Forex market and Forex trading. Forex markets are international currency markets where trillions of dollars are traded daily. This makes Forex the biggest financial market on this planet. To understand more about how it works let’s analyze who are its participants and what they are doing. The Forex market consists of international banks, hedge funds, big corporations, professional traders, and guys like me and you also called retail clients. Banks and hedge funds are constantly exchanging big sums of money for another currency making the Forex market super liquid, meaning you can buy and sell at any moment and there is always someone willing to buy from you. The Forex market is not centralized which means few regulations and centralization are occurring, but several reputable regulators make it a stable environment for traders. Currencies are pegged against each other in Forex called currency pairs and are represented as pairs of one currency against another. The most popular currency pair is EURUSD. EURUSD represents the price you have to pay in dollars to buy 1 EUR. This basic premise is one of the most important in the Forex market you have to memorize. There are major pairs
Forex market in Kenya
Forex markets gained a significant rise in recent years in Kenya as the country is regulating the markets allowing financial players to play with predetermined rules and many brokers are licensed locally. The Forex market is an important part of the country’s economy contributing to its earnings from financial markets.
Regulatory bodies in Kenya that oversee Forex trading
The Capital Markets Authority or CMA is the main regulatory body overseeing Forex brokers in Kenya. Regulating Forex markets is critical to traders not getting scammed and to reducing the number of fraudulent transactions. Another thing is the regulator prohibits brokers from certain actions and promotes transparency and healthy competition. All brokers have to use segregated bank accounts for client funds and they can not touch client money for their purposes. Having a domestic regulator that protects your rights is very helpful and increases the number of fair brokers that offer trading education for Kenyans. Getting quality education and practical skills is very important in Forex just like in every technical field and Forex is a very technical field combining theoretical knowledge and strong practical skills.
How to start Forex trading in Kenya
There are several must-take steps before you can become a successful Forex trader in Kenya:
- Select a trustworthy broker that allows you to trade with a free demo account and has educational resources
- Get an education about Forex markets
- Open and operate a demo account
- Develop your own tradings strategy that addresses risk management and other important things
- Only after trading with a demo account can you open a live account with a small budget to master trading psychology when real money is at stake
Selecting the proper Forex brokers in Kenya
To start trading FX in Kenya successfully, the broker selection process is one of the first things to do. The list of criteria your broker has to meet is as follows
- The broker you select must be regulated in Kenya or by any reputable authority worldwide. The brokers offer online trading platforms that allow traders to buy and sell various currency pairs.
- Make sure it offers one of the advanced trading platforms MetaTrader 4 (MT4), MetaTrader 5 (MT5), cTrader, or TradingView.
- Offers payment methods that are popular in Kenya including M-Pesa, Airtel Money, T-Kash, and Equitel. Mobile money allows users to send and receive money, pay bills, and purchase goods and is super popular in Kenya. Other popular payment methods in Kenya include PayPal, Neteller, Skrill, bank cards, and wire transfers. But the most useful and simple method of payment that is available in Kenya is still M-Pesa.
- Has a 24/5 live chat to contact the broker quickly and conveniently, and the website and support are both multilingual.
- Spreads and fees. Make sure the spreads offered by your broker are within industry standards and fees are manageable to make sure commissions are not eating up your profits. High spreads and fees can render profitable strategies useless. Industry-standard spreads for major pairs are around 1 pip and trading commissions for zero spreads are not more than 7 USD round turn.
- Safety and security – besides segregated accounts, another important aspect of trading especially for beginners is negative balance protection. When trading with exceptionally high leverages it is possible to lose more than your trading account resulting in debt, to prevent this negative balance protection ensures you can not lose more than the funds on your account. Another side of security and safety is that brokers use SSL for encryption and allow two-factor authentication to protect their users from hackers.
Starting Forex trading is easy when you know the basics of Forex markets and select the broker that is regulated by Kenyan CMA and offers M-Pesa payments coupled with low minimum deposit requirements. You must memorize and understand all necessary terms and slang to begin Forex trading Kenya successfully.
Opening a demo account and familiarizing yourself with trading platforms
To start practicing and get to know how actual trading works it is important to open a demo account and start familiarizing yourself with trading platforms. A trading platform like MT4 offers price charts and various tools called indicators and drawing tools to analyze prices. Most of the brokers offer MT4 and MT5 platforms. With MT4 being the most popular among brokers it will be much more comfortable to learn how to use MT4. This will allow you to trade almost with any Forex broker. The main functions to know about MT4 are
- Opening and closing trading positions
- Setting stop loss and taking profit orders
- Applying indicators like moving averages to the charts
- Customize charts to appeal to your taste
- Switch between timeframes and playing with drawing tools
Make sure to watch video tutorials and open a demo account with the broker selected by the abovementioned criteria.
Learning Forex Trading in Kenya
It is all fun and easy to know the basics about Forex markets and how to do basic functions of MT4, but you will need more than that to start FX trading in Kenya. Getting quality education is key to success and below are everything you will need to learn to become successful in Forex.
Technical and Fundamental Analysis
Two main forms of analysis used by successful traders are fundamental analysis and technical analysis. Fundamental analysis refers to using macroeconomic events and fundamental news indicators to predict potential movements in the markets. Macro analysis of events such as interest rates, inflation rates, GDP, NFP, and unemployment rates, can have a tremendous impact on Forex prices. NFP or Nonfarm Payrolls is especially known for shaking the Forex markets consistently. Nonfarm Payrolls provide an estimate of the number of jobs added or lost in the US economy, excluding the agricultural sector, which is why it is referred to as “nonfarm.” You will need a way to watch all these important indicators and their release dates and times. One way to achieve this is by using an economic calendar which is widely available online. Make sure you have selected the impactful events in the filter.
Technical analysis is analyzing the price charts with various technical indicators and tools applied to the chart. Indicators such as moving averages that track the asset’s average prices for a user-determined period can greatly aid traders in defining if the price deviates from the average. Other popular technical indicators include Moving Average Convergence Divergence or MACD, Stochastics, Bollinger bands, etc. Indicators are powerful mathematical tools that provide insight into what markets are doing. Traders’ main job is to determine what the market is doing and react to it accordingly. Incorporating both fundamentals and technicals is essential to learn trading Forex in Kenya and become profitable.
Forex trading strategies
When knowing how markets work and how to analyze them it is time to develop a trading strategy. A trading strategy is a set of rules or guidelines that encompass everything a trader should do from opening a position to closing it. The rules must include the following:
- Conditions for opening a position, maybe a crossover with some fundamental confirmation, you have to clear what exact terms for entry are
- Risk management rules with stop loss and take profit, exact rules for exiting an open position is key to success
- Make sure to translate all trading rules into logical steps you will follow strictly
- Trading instrument and timeframe – it is important to have one or a few trading instruments and a predetermined time frame where your main trading analysis is conducted. This is to help you not get lost in the vast amount of currency pairs and timeframes brokers offer these days
- Money management and trading psychology will help you to select the proper trading volume for each open position and control risk exposure. Controlling risks is the main task of every trader and it ensures the trader stays in Forex trading in the long term. Make sure to define exactly how much of your capital you will allocate for each trade. Fear and greed are two enemies of a trader and proper emotional balance and discipline will help manage these emotions accordingly. A trading strategy helps traders take the trading process under full control and emotional management is a crucial part of it.
- Backtesting and optimization – it is essential to backtest the strategy before going live. With backtesting, you can evaluate how profitable the strategy would have been if applied to historical prices. Tweak and optimize the trading strategy after you start trading with it to ensure it adapts to ever-changing market conditions.
The last part of the trading strategy must be to execute it flawlessly and follow its rules eliminating subjectivity. Following rules like a robot also ensures you do not fall under emotional threats like fear or greed and promotes discipline which is the number one skill of Forex traders.
Forex webinars and seminars
The best way to understand the practical side of trading is to attend various online webinars and seminars where traders teach their strategies. Webinars allow beginners to ask questions and get expert answers to them. It also helps traders share their ideas and find like-minded motivated beginners.
The Forex trading community in Kenya
Community is critical in any field as many like-minded people can share their experiences and ideas about trading and which methods work best for them. The Forex trading community in Kenya is growing with traders from diverse backgrounds and expertise levels.
Beginner Forex tips on how to trade Forex in Kenya
- Understand the basics of Forex trading – What is Forex, who are participants, what is traded on the Forex market
- Find a trustworthy broker that is regulated by CMA and offers a high level of security policies
- Get Forex education and connect with like-minded traders – Make sure you know how Forex markets work and how to analyze price movements
- Open and operate a demo account to gain practical experience
- Develop your trading strategy – this is crucial for long-term success
- Be disciplined and focus on risk management – a trader’s job is to stay in the game in the long term, meaning you will have to implement strong risk management methods and always use stop loss to prevent unnecessary losses.
- Monitor spreads and fees according to your trading strategy to reduce their impact on the trading performance
FAQs on how to start trading Forex in Kenya
Where to start Forex trading in Kenya?
You can trade Forex from anywhere in the world including Kenya. By getting an education and implementing theoretical skills into practice you will be able to become a profitable trader from Kenya without the need to work a 9-5 job or go abroad which is the main advantage of Forex trading.
What should I know before starting trading FX in Kenya?
Before going live you need to get an education, select a proper broker that is regulated and has attractive requirements and spreads, trade demo, and master trading skills, then develop a trading strategy, and only then can you start trading live. Make sure to read our comprehensive beginner Forex tips for Kenya above.
How to prepare to start Forex trading in Kenya?
Being disciplined is the best advice anyone can give to beginner Forex traders. Make sure you will develop a strong emotional balance and include trading psychology in your trading strategy rules. Find a regulated broker that provides negative balance protection.