The foreign exchange market, also known as the FX market or forex market, is the largest financial market in the world, with a daily market cap of over $5 trillion. Currently, forex is the hottest choice for investors and traders, where they make an insane amount of profits from the fluctuations in the price of currency pairs. In the forex market, traders buy and sell currency pairs based on which the exchange rates fluctuate due to the demand and supply of that particular currency pair. The FX market remains active 24 hours a day and five days a week, so traders get a lot of time to invest. The key players in the forex market are central banks, business firms, hedge funds, individual traders, and other mega financial institutions.
Forex trading is highly popular in Kenya, with over 1,00,000 forex traders in the country. Forex trading gained popularity in Kenya in the last decade. The government established the Capitals Market Authority (CMA) to monitor the market to deal with the increasing number of forex traders in Kenya. The Capitals Market Authority is an independent government authority created to provide licenses, supervision, and regulation of the financial activities taking place in Kenya. The forex traders in Kenya can trade with the forex brokers licensed by the CMA to conduct financial operations. One can also trade with international forex brokers that accept Kenyan forex traders. In this article, we will discuss the critical aspects of forex trading in Kenya and how to use the key instruments to become successful in this arena.
Understanding the Essentials of Forex Trading
In forex trading, the traders predict a particular currency pair’s future price as per current trends and financial situation. If their prediction turns out to be correct, they make a commission from the price difference between the initial and final prices of the currency pair. With the advent of the internet, trading forex has become highly smooth as one can now easily register with the best forex brokers in Kenya and start making a profit from day one. These days, forex brokers offer a wide range of trading instruments such as trading charts, statistical tools, stop loss, and take profit features and trading tips. If we talk about the forex trading situation in Kenya, the traders here are too reckless and tend to invest in currency pairs with high risks and profits. As per the concept of sophistication and capitalization, there are six primary players in the forex market: central banks, significant businesses, trading platforms, investment banks, retailers, and hedge banks. There are mainly four kinds of trading methodologies in the forex market: day trading, scalping, position trading, and swing trading. On a global level, four currency pairs in the forex market are preferred by investors from every corner of the globe. All four have been described below:
- EUR/USD: It is the most popular currency pair among forex traders. In this currency pair, Euro is the base currency, and the US Dollar is the quote currency. This currency pair, also known as Fiber, is highly liquid and less volatile than other pairs, as it is backed by two of the world’s largest economies.
- USD/JPY: It is the currency pair with one of the highest pip values compared to numerous others. It happens because the Japanese currency, Yen, has a relatively lower price than the US Dollar. Yen’s value is lower due to the smooth banking policies of the Bank of Japan. This currency pair is known as Gopher in the FX market.
- GBP/USD: In this currency pair, the Pound is the base currency, and the US Dollar is the quote currency. This pair is also known as Cable in the forex market.
- USD/CHF: Here is another stable currency pair after the Gopher, with the US Dollar as the base currency and the Swiss Franc as the quote currency. Due to the stable economic condition of Switzerland, this currency pair, also known as Swissie, is trendy among forex traders in Kenya.
Advantages and Risks of Forex Trading in Kenya
Forex trading can be a lucrative career for traders who use a well-thought trading plan to execute their trades. However, as it is the biggest financial market in the world, multiple events and factors affect it massively. From the stability of the economies and mega events of the financial and the physical world to the actions of central banks, the forex industry is prone to the effects of such factors. Sometimes these fluctuations result in good profits for some traders while affecting others negatively. There are multiple advantages and disadvantages of forex trading in Kenya. Some of those are mentioned ahead in detail.
One of the main reasons behind the growing forex industry in Kenya is the freedom the government provides to trade in currencies. With the rise in digitalization, Kenyan traders now have easier access to forex instruments and brokers that help them immensely when starting forex trading.
- Potential for High Returns
Forex traders in Kenya get the advantage of the leverage feature offered by forex brokers, which significantly increases their chances of making high profits even with a small investment. Moreover, due to the high volatility in the forex market, traders in the country get multiple high-profit opportunities that they can use to make massive profits.
Forex traders in Kenya can use the diversification strategy to enhance their forex portfolio. Diversification is a concept of forex trading where a trader opens multiple trades with different risk levels per the risk management principles.
Forex brokers in Kenya are regulated by an independent government agency, the Capitals Market Authority (CMA). All the best forex brokers in Kenya operate under the jurisdiction of CMA and adhere to its rules and regulations.
The CMA keeps the forex industry in Kenya safe and secure from damaging elements, which allows traders to invest freely in their favorite forex assets.
- Unpredictable Market Movement
Making a correct prediction in the forex market is tough as it is affected by various factors. Various risks, such as interest, politics, and currency, come under market risk. One can reduce this risk by doing deep research about all the risk factors before executing a trade.
- Liquidity Factor
The forex market sees over $5 trillion in daily trading, making the market highly liquid. Sometimes this high liquidity makes trades commit mistakes that cost them a lot of money. The traders must invest in the currency pair as per their liquidity standards.
As forex trading takes place entirely on the internet, many scammers and other fraudulent entities try to scam traders off their hard-earned money. It is advisable that while trading in the forex market, the traders must only use the best forex brokers in Kenya that the CMA licenses to carry out forex operations.
Key Trading Instruments for Forex Trading in Kenya
The best forex brokers in Kenya offer traders a wide range of trading instruments that they can use to enhance their trading experience. Some of the most commonly used trading instruments are mentioned in detail.
- Economic Calendar: An economic calendar is an essential tool for a successful career in the forex industry. It keeps one updated with the timings of impactful events that may cause fluctuations in the price of a currency. Forex industry professionals use the economic calendar to plan their trading sessions and portfolio enhancements and set alerts for changing chart patterns that may arise due to these events. The top forex brokers in Kenya offer an economic calendar to the forex traders who sign up with them for their forex trading activities.
- Technical Indicators: Technical indicators are strategic tools traders use to analyze forex trends to predict a currency pair’s future prices. The most commonly used technical indicators are moving averages, Bollinger bands, Fibonacci retracements, and support & resistance levels. Traders based in Kenya can use these technical indicators to assess the current and past market trends to make a correct future assumption.
- Trading Platforms: A trading platform is a digital interface that traders use to access the forex markets. Forex brokers offer trading platforms in the form of an online portal, application, or some form of downloadable program. MetaTrader 4, also known as MT4, is the best forex trading platform in the forex industry at the moment. One can use the features of the trading platforms to improve their decision-making and analyzing skills. The traders in Kenya should choose the forex brokers that offer the MT4 trading platform.
- Risk Management: Forex trading involves various risk factors, which is like a roller coaster ride for Kenyan traders beginning their forex journey. However, their journey can be much smoother if they inculcate certain trading principles. Here comes the role of risk management, via which one can navigate the complications of the forex industry and even turn it into a full-time career. Risk management’s critical components are trading strategies like diversification, hedging, position trading, stopping loss, and taking profit orders.
Choosing a Forex Broker in Kenya
The forex market in Kenya has been expanding for the last few years, enabling the masses to trade foreign currencies for high profits. With a lot of content available on the web, starting with forex trading has never been easier; however, choosing the best forex brokers in Kenya is another story. Many forex brokers have entered the market to meet the increasing demand for forex traders in the country, but you cannot trust all of them. Multiple factors must be considered while choosing the best forex broker in Kenya, some of which are explained below:
- Regulation: Traders are advised to choose the forex brokers licensed by the Capital Market Authority to carry out the forex operations. Trading with regulated forex brokers will keep your funds and personal information safe as those work under the jurisdiction of CMA.
- Trading Platforms: IF you want a smooth forex trading experience, we advise you to go with the forex brokers offering MT4 trading platforms. The MetaTrader 4 platforms offer a wide range of additional features to enhance the trading experience.
- Fees: Another major factor that must be considered is the fees levied by the forex broker for trading operations. The traders must select the forex brokers with minimal transaction fees, low first deposits, multiple deposits & withdrawal options, and quicker payouts.
- Customer Support: The commitment of a forex broker to its customers can only be verified by its customer support section. Forex brokers that offer multiple customer service options with quick response timing must be preferred over others. Some standard customer support options the forex brokers offer are phone, email, live chat, and social media support.
To reduce your workload, we have done the research for you based on the factors above. Here is a list of some of the best forex brokers in Kenya.
- Pepperstone: This is one of the best CMA-regulated FX brokerages in Kenya, It offers a wide range of currency pairs, a comparatively low payout charge, and excellent client service
- IC Markets: This forex broker charges a low commission of $3.5 per lot and 0 spread. It also has a low withdrawal fee and a good collection of tradable assets.
- Markets.com: It provides traders with rapid, low-cost trading on over 2,200 financially leveraged products, far more than other brokers.
Developing a Forex Trading Strategy in Kenya
On a daily basis, millions of investors enter the forex markets to earn profits; however, not everyone gets the success they aspire for. One of the primary reasons behind this scenario is the traders do not have any trading plans or strategies. Professional traders use forex trading strategies to assume the prices of a currency pair correctly. The trading strategies are built on technical analysis, news, or the fundamentals of the FX industry. One can create a trading strategy for themselves or choose one from the web. Here are some key factors that one must consider while developing the trading strategy in Kenya.
- While creating a trading strategy, the traders are advised to consider their personal goals and risk tolerance. The trading strategy must be efficient enough to meet their goals and objectives in a timely manner without encouraging them to take unnecessary risks that may be unaffordable to them financially and mentally.
- The best trading strategy is the one that uses all the trading instruments at one disposal efficiently. Traders must create a trading plan considering the trading instruments, such as the economic calendar, and risk management features, such as stop-loss and take-profit orders, trading platforms, and technical indicators.
- No strategy is foolproof in trading; however, one can remove its kinks through multiple checking mechanisms. Thus, it is advisable that after creating a trading strategy, the traders must refine it by backtesting and demo trading.
To sum up, we can say that forex trading is becoming highly popular among investors based in Kenya. Owing to the advancements in the digital world, executing forex trades has become highly smooth. The forex brokers in Kenya offer their customers a wide range of trading instruments, including technical indicators, economic calendars, educational tools, and trading platforms. Traders should keep in mind certain factors, such as low fees, regulations, trading platforms, quick payouts, and customer support while selecting the best forex brokers in Kenya. They must also have a well-researched trading strategy to minimize losses and secure profits.
In this article, we have also provided a list of the best forex traders in Kenya after comparing them over specific parameters. We recommend these forex brokers as they are genuinely licensed by the CMA, offer multiple trading features, levy low fees, and have a professional customer support section to address the customers’ grievances. Forex trading is highly unpredictable, so traders are advised to do their homework before blindly entering the industry.