If you’re based in Kenya and have considered trading in the forex market, theres good news. With the rise of online trading platforms, the forex market has become more accessible than ever for individual traders in Kenya.
To trade forex in Kenya, you’ll need a working viable trading strategy within a sound trading plan ideally with a money management component. You'll also need a dependable online forex broker to execute your trades.
If you are looking to dip your toes into the world of forex trading, it's important to understand the basics and develop a solid trading strategy. Keep reading the uncover the key steps and considerations for starting forex trading in Kenya, so you can start on the right foot and maximize your chances of success in the market.
How to Get Started with Forex in Kenya
Because of Kenya’s notable business potential and demographics, online forex brokers that perceived an opportunity in the country have established offices in Lagos and other Kenyan cities. If you’re new to trading, forex trading in Kenya is relatively easy. Follow the six steps outlined below:
- Access to a stable internet connection: Get a relatively modern device that can connect to the internet, such as a smartphone, tablet or computer. It's important that you have a stable and ideally fast internet connection for efficient trade execution.
- Choose and online broker: Find an online forex broker that accepts clients from Kenya. It is recommended to review a few options to make sure the broker meets your trading need.
- Open an account: Open a margin account with the forex broker of choice.
- Deposit funds: Make a deposit using a payment method accepted by the broker.
- Download a trading platform: Download the broker’s proprietary trading platform or a platform you can use with that broker. Most brokers offer trading platforms such as MetaTrader 4, MetaTrader 5 or TradingView.
- Make your first trade: Now you're ready to make and monitor your first trade.
Best Online Forex Brokers in Kenya
The Kenyan financial sector has oversight from the country’s main financial regulator, the Capital Markets Authority of Kenya (CMA). The agency was founded in 1989 by the Capital Markets Act and has the responsibility for improving the safety of the nation’s capital markets for Kenyan investors. All brokers operating in Kenya that provide access to the forex market must be authorized and regulated by the CMA.
Select from among the well-regulated brokers listed below to find the best online brokerage available to Kenyan forex traders.
- Best For:Best for Leverage Trading with Many Instrumentssecurely through IFC Markets's website
- Best For:Forex Trading in and Outside the U.S.securely through Forex.com NON US's website
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% 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.
The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.6% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
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.
Kenya Forex Trading Strategies
After you’ve completed each of the steps outlined above, you’ll have a funded online brokerage account that lets you trade forex from Kenya. You will then want to develop a trading plan that includes a profitable trading strategy to increase your chances of success.
Depending on your level of experience and expertise in the market, you can find listed below several strategies that have been proven to yield positive results for some fortunate retail forex traders. The strategies listed can work for forex traders whether they’re trading from Kenya or anywhere else in the world.
- News trading: If you like to keep up with economic and geopolitical news, then news trading might be for you. The strategy involves taking advantage of sharp movements in the exchange rate of major currency pairs after a key economic release or another important news announcement.
- Scalping: This strategy involves taking advantage of very short term market moves. Scalpers enter and exit the market quickly to capture any profits a few pips at a time.
- Day trading: Day trading strategies generally limit all transactions to a single trading session. Day traders buy and sell throughout the trading session, but they close out all positions by the end of the day to avoid the extra risk incurred when taking overnight positions.
- Swing trading: This strategy is based on entering and exiting the market based on momentum technical indicators. Swing traders’ chief concern is to buy low and sell high if they go long or sell high and buy low if they go short. The strategy has no time constraints, so swing traders may take overnight positions.
- Trend trading: Trend trading involves taking a long view of the currency pair’s directional movements. The strategy calls for identifying movements called trends and then establishing currency positions that follow the trend until it concludes.
This 1-year chart shows an upwards trend in the USD/KES currency pair from 100.34 on February 2, 2020 to 1.0727 on April 27, 2020 that a trend trader could have taken advantage of. Source: XE.com
Forex Trading Example in Kenya
Kenya’s national currency is the Kenyan shilling (KES) and has the code KSh. The Kenyan shilling is divided into 100 smaller units known as cents. The currency is issued and managed by the Central Bank of Kenya (CBK).
A recent quote for the USD/KES exchange rate was 106.50 Kenyan shillings to 1 USD. If your market analysis has led you to expect an increase in the USD/KES exchange rate, then you might be able to buy 100,000 U.S. dollars against the Kenyan shilling today at that 106.50 exchange rate.
If the USD/KES exchange rate then rose to 107.50, then you would use the calculation below to determine your trading profits:
100,000 USD x (107.50-106.50 KES/USD) = 100,000 KES
To then convert that amount of Kenyan shillings profit into U.S. dollars, you would need to perform the following calculation:
100,000 CAD ÷ 107.50 KES/USD = 930.23 USD
Conversely, if the USD/KES exchange rate had instead dropped to 105.50, then your trading loss would be:
100,000 USD x (105.50-106.50 KES/USD) = -100,000 KES
That incurred loss converted into U.S. dollars at a USD/KES exchange rate of 105.50 would be:
-100,000 KES ÷ 105.50 KES/USD = -947.87 USD
Making Money with Forex in Kenya
The key to making money in the forex market from Kenya (or anywhere else in the world for that matter) means developing a profitable trading strategy that can be incorporated into a sound trading plan. If you are new to trading, you can skip developing a trading plan and just copy a successful trader’s transactions via a social trading platform.
If you do decide to develop your own trading plan, your forex trading success depends in large part on how well your strategy performs and whether you have the discipline to follow it within the overall scope of your trading plan. Any successful strategy can be incorporated into a trading plan, whether you prefer to trade trends for long-term profits or scalp the market intraday.
In general, a good trading strategy should integrate objective trading criteria, a form of risk/reward analysis and sound money management principles into a plan you can realistically implement in a disciplined manner. Keep in mind that many strategies might initially seem to work well but that they may eventually yield lackluster results due to changing market conditions.
Forex Terminology
As in many other professions, forex traders have developed a unique terminology that you’ll probably want to learn before you begin trading. These include the following terms:
- Arbitrage: A simultaneous trade that aims to take advantage of minuscule price differences among separate markets.
- Base currency: The first currency in a pairing. This price is shown first, and the second currency’s price is converted so that you can see the difference.
- Counter currency: The second currency in a pairing.
- Future: A contract where the buyer agrees to purchase a particular asset at a predetermined price in the future. Buyers can cash out of futures early and pocket the difference in the current price of the asset and the contract price.
- Going Long: Investing in an asset with the expectation that its value will rise.
- Going Short: Selling an asset prematurely with the expectation that its value will decrease.
- Lot size: The standard lot size in forex is 100,000 base currency units. Smaller sizes supported by online brokers include a mini lot that represents 10,000 base currency units and a micro lot of 1,000 base currency units.
- Margin calls: When holding your trading positions requires an amount of margin that exceeds the funds in your account, a broker can issue a margin call for you to deposit additional funds to cover them. Some brokers will automatically liquidate your trading positions if this situation arises.
- Orders: These are instructions to a forex broker to execute positions on your behalf. Several different types of orders used in the forex market include limit, stop-loss, take profit and market orders.
- Pip: An acronym for “point in percentage”, a pip represents the smallest exchange rate movement for a particular currency pair.
Is Trading Forex in Kenya Right for You?
Unless you decide on using a social trading platform, trading forex requires knowledge of the market in question, a viable trading strategy and enough discipline to follow your overall trade plan. If all of those requirements are met, you have a better chance of becoming a successful forex trader.
You will want to make sure you use a reputable and well-regulated broker if you plan to start trading forex from Kenya. Just select a broker from our list that takes Kenyan clients and make a request to open a trading account.
Frequently Asked Questions
How much does it cost to start forex in Kenya?
The cost of starting forex trading in Kenya can vary depending on several factors such as the broker you choose, the amount of capital you start with, and the trading tools and resources you use. Certain forex brokers offer the option to open an account with a minimum of Ksh 5,000.
Is forex trading legal in Kenya?
Yes, forex trading is completely legal in Kenya. It it important to use a forex broker that is properly regulated in Kenya.
Do forex traders pay tax in Kenya?
In Kenya, forex traders are required to pay taxes on their profits. The tax rate for forex trading income is calculated based on the individual’s tax bracket and the amount of profit made. It is important for forex traders in Kenya to keep detailed records of their trades and profits in order to accurately report and pay their taxes to the Kenya Revenue Authority.
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