Since there is a chance for profit in the foreign exchange market, traders in Kenya of all experience levels, from novices just starting out in the financial markets to seasoned veterans with years of trading experience, are drawn to Forex trading.
Many forex traders immediately enter the market, only to swiftly quit after incurring losses and setbacks. This is because access to the market is easy, with 24-hour sessions, substantial leverage, and relatively low costs.
For this reason, we have provided 5 top tips to safely trade Forex in Kenya and avoid financial losses.
1. Research the markets
Traders need to continually conduct market research so that their trading decisions remain responsive to developing market conditions and international developments.
A trading plan is developed as part of this research process; this is a methodical approach to screening and analysing products, establishing an acceptable level of risk, and defining both short-term and long-term investing goals.
2. Sign up with a regulated Forex broker
Traders should be sure to open an account with regulated Forex trading brokers in Kenya, preferably one that is regulated by the local CMA.
ECN Forex brokers provide competitive trading prices; but if the broker of your choice is not regulated by the CMA, ensure that it is regulated by other reputable international regulatory organisations like the FCA, CySEC, ASIC or the FSCA in South Africa.
3. Practice trading on a demo account
Traders can test out their strategies with no risk on almost any broker platform by opening a demo account. The ability to practice order entry is perhaps the most significant advantage of a demo account for a trader.
Mistakes in trading can have terrible financial consequences, but they can also cause a great deal of emotional turmoil. Therefore, it’s best to practice entering orders with virtual money first in a risk-free demo environment.
4. Start by trading with small amounts of capital
When a trader has prepared adequately, tested their strategies on a demo account, and is confident in their trading strategy, they may be ready to trade “live,” or with real money.
Real trading conditions cannot be replicated in a practice environment. So, it’s important to launch with a minimal amount of trading capital at first.
Starting out with a smaller position size allows a trader to assess their trading strategy and emotional state, as well as gain experience with placing precise order entries without jeopardizing their entire trading account.
5. Be cautious when using leverage
The high degree of leverage available in Forex trading is unprecedented in other markets. For many, the allure of foreign exchange trading is in the possibility of making significant returns on relatively modest initial investments.
When used properly, leverage may be a powerful growth tool. Conversely, leverage can magnify losses at the same rate. Maximizing leverage would allow the trader to establish a much larger position, but taking a smaller position will reduce exposure to loss, so control the amount of leverage in your account.