As a developing nation, forex trading is still largely unheard of in most parts of Benin. However, as internet access becomes more widely available throughout the country, the forex market is becoming more easily accessible to the average trader. Before you trade forex in Benin, be sure to read our complete guide to brokers, trading strategies, best practices and more. Foreign exchange trading is booming, but how can the financial markets in Benin give you the access you need?
Get Started with Forex in Benin
Getting started with a retail forex career begins by opening a brokerage account. Follow these simple steps to open your account, add your trading funds and place your trade.
Step 1: Connect to the Internet
Before you can begin comparing brokers, be sure that you have a stable and private connection to the internet. Do not trade or open a brokerage account on a public computer, like a library computer or in an internet café.
Step 2: Choose a Forex Broker
As a trader in Benin, you’ll have access to international brokers offering services in your territory. Local brokers are regulated by the Central Bank of West African States, while international brokers are licensed in their own jurisdictions. Compare a few brokerage options in terms of fees, available currencies and supported trading tools before you open an account.
Step 3: Download a Trading Platform
Though your broker might offer you access to its own in-house trading platform, some brokers require that you download a 3rd-party trading platform like MetaTrader 4 or 5. Check and see which platforms your broker supports before you download it.
Step 4: Fund Your Account
After your account has been opened in full, link a bank account, debit card or electronic wallet to add your trading funds. It might take a few days for your trading funds to appear in your account.
Step 5: Place Your First Trade
Once your trading funds clear into your account, you can officially place your 1st currency trade through your broker. Remember, foreign exchange transactions occur instantly unless you use a special order type that helps you hedge against risk.
Benin Forex Trading Strategies
There are many trading strategies that you can use in Benin to make a profit when trading forex. Because the West African CFA franc is considered to be a more volatile currency in its currency pairs than reserve currencies like the dollar, pound or euro. Most forex traders use a strategy that relies heavily on technical analysis. Technical analysis is a type of market analysis that uses past charting patterns and formations to predict how a currency will move in the future.
Let’s take a look at a few of the most common chart patterns you can use when trading the West African CFA franc as your base currency. Though these chart patterns don’t guarantee that you’ll see a profit when you trade, they can be very useful in helping you form your trading strategy.
The double top pattern is a bearish pattern that indicates that a currency will soon begin a downward movement. In most cases, the currency’s value will establish a support level, reach a peak, dip down to the support level and then reach another peak at roughly the same time. When the currency breaks through the support level after the 2nd peak, a sell signal is triggered and the currency will likely continue its decline.
If you’re looking to use a very short-term strategy, consider searching for reversal candlesticks. A reversal candlestick is a formation that indicates that a currency will very soon change its value and move in the opposite direction. A reversal candlestick might be bullish or bearish depending on where it is placed and its strength. As a general rule, you can tell how strong a candlestick is by measuring its shadow length — a longer shadow means that the reversal trend is more likely to be confirmed.
Forex Trading Example in Benin
Forex traders generally earn money by taking a long position against their base currency that appreciates in value against the counter currency or by being short when the base currency falls in value. Capitalizing on movements in currency exchange rates allows traders to earn more of their counter currency by taking profits. Let’s look at an example.
Natasha is a trader in Benin who holds the West African CFA franc (XOF) as her base currency. After doing her research, she believes that the franc will soon fall in value against the Japanese yen (JPY). Natasha deposits 1,000,000 CFA into her account. Her broker offers her 10:1 leverage on this trade, which means that she can place orders worth up to 10,000,000 CFA.
In this example, 1 XOF is currently equal to 0.19 JPY. Natasha shorts her entire amount of francs into yen, leaving her with ¥1,900,000 in her brokerage account. Natasha keeps her eyes on the value of both the CFA franc and the yen. When 1 XOF is equal to only 0.17 JPY, she decides to take her profits by converting her lot of yen back to CFA francs. This leaves Natasha with about 11,176,470 CFA in her margin. After returning the money she borrowed in leverage, Natasha has made a profit of about 1,176,470 CFA on this trade.
Making Money with Forex in Benin
Earning money with forex trading is completely legal in Benin and there are no limitations to the amount of profit that you can make from your trading. You can also freely convert West African CFA francs into any other currency, and you can deposit as much money as you like into an international brokerage account.
While forex trading is becoming more popular throughout Africa, lawmakers have had difficulty keeping up with this changing market. This means that there are still many illegitimate forex brokers and forex scams operating throughout Benin and West Africa as a whole. Be sure to thoroughly research every broker you consider working with and check up on their licensing status with the Central Bank of West African States or another international body before you open an account.
Best Online Forex Brokers in Benin
There are very few laws that regulate forex brokers operating in Benin when compared with other countries like the U.S. Working with only licensed, legitimate brokers is one of the best ways to protect your capital and avoid forex scams. Not sure where to begin? Consider a few of our favorite forex brokers offering services to investors in Benin.
- securely through eToro Forex's websiteBest For:Demo Accounts
CFD trading is not available to U.S. users. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
- securely through Forex.com NON US's websiteBest For:Forex Trading in and Outside the U.S.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
- securely through IG Markets's websiteBest For:Forex Execution
For USA residents: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. Be advised that CFDs are not available in the U.S. from this provider.
Outside of the USA: CFDs are complex instruments. 70% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.
One of the first things you’ll notice when you trade forex is that forex brokers and traders have their own unique “language” they use to discuss their trades. Familiarizing yourself with a few of the most common forex terms you’ll encounter will make it easier to learn about the market before risking any of your own money. Here are a few terms you’ll need to know before you get started with forex trading.
- Pip: A pip is the smallest incremental change in a currency pair's exchange rate, usually rounded to the 4th decimal place. Forex traders often calculate currency movements using pips. For example, if the value of the USD moves from 1.0000 to 1.0010 in relation to another currency, you might hear a trader say that the value has moved by 10 pips.
- Lot size: A lot size is a standardized trading amount, usually 100,000 base currency units.
- Orders: When you want to initiate a trade, you’ll do so by placing an order through your forex broker. Your order tells your broker which currencies you’d like to exchange when the trade should be placed and the exchange the order should be executed at. There are multiple types of orders, and the orders that you can use will vary depending on the options that your broker supports.
- Calls: If you use leverage to trade and the value of your portfolio decreases, your broker might subject you to a margin call. If you receive a margin call, you must close out your position or deposit more money into your account to make up the difference. Margin calls are more common when higher leverage levels are used in poorly funded accounts, so be very wary of the amount of leverage you use.
Entering the Emerging Forex Market
Though forex trading in Benin isn’t as widespread as other countries in Africa, it’s becoming easier to access the market. Unfortunately, regulations from the Central Bank of West African States haven't quite caught up to international regulations from bodies like the Financial Industry Regulatory Authority or the Cyprus Securities and Exchange Commission.
Frequently Asked Questions
Which country trades forex the most in Africa?
The most active country in Africa for Forex trading is Nigeria. According to the Bank for International Settlements, Nigeria had the highest average daily volume traded in 2017 at $11.9 billion. This was followed by South Africa and Egypt at $9.7 billion and $6.3 billion respectively. The total African Forex market turnover in 2017 was estimated to be around $43 billion, making Africa one of the largest regional foreign exchange markets.
Which African countries trade forex?
In Africa, a number of countries have become increasingly involved in forex trading, with countries such as Nigeria, South Africa, Kenya, Ghana, Botswana and Benin now boasting well-established trading communities.
Do you need a license to trade forex in Nigeria?
No, you do not need a license to trade forex in Nigeria. However, it is strongly recommended that you become educated and familiar with the basic concepts of forex trading before investing any money. There are numerous online resources available for this purpose.
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