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How to Trade Forex in Kenya

Trading forex is permitted and relatively easy for individual residents of Kenya even though the country enhanced regulations for local forex trading businesses in 2017. Ready to start trading in Kenya? We’ll guide you through the process.

History and Current State of Trading Forex in Kenya 

Kenya’s financial services sector dates back to the 1950s and its market-driven economy is widely considered the financial, logistical and commercial hub in East Africa. 

Kenyan locals and many forex traders should be familiar with the Kenyan shilling (KES), the national currency of Kenya. Each shilling is divided into 100 smaller units called cents. The Kenyan shilling is managed and issued by the Central Bank of Kenya (CBK). 

The financial regulator responsible for overseeing the Kenyan financial sector is known as the Capital Markets Authority (CMA) of Kenya. It was founded under the Capital Markets Act in 1989 and its goals include improving the safety of Kenya’s capital markets for investors. All forex brokers that operate in Kenya must be authorized by the CMA. 

The CMA estimated that about 50,000 Kenyan brokers, money managers and dealers were in the forex trading business in 2017. These firms mainly used offshore platforms not overseen by the CMA to offer services to Kenyans. 

Stricter regulations were passed in Kenya known as the Capital Markets (Online Foreign Exchange Trading) Regulations 2017 that required organizations to register with the CMA. This legislation allowed the CMA to better oversee online forex businesses that operate in the country.

Relatively few reputable online brokers currently have offices in Kenya. This means that traders based in Kenya will typically be better off opening accounts with reputable foreign online brokers that accept clients from their country. Forex brokers rarely offer websites translated into Bantu Swahili but just about all of them provide customer service and a website in English. 

The top online forex brokers allow you to trade a wide range of currency pairs and some might also permit cryptocurrency and social trading. Brokers that also support CFD, futures and/or securities trading will often let you trade indices, individual stocks, commodities and bonds. 

What Kenyans Should Look for in a Forex Broker

Choosing the best online brokerage depends first and foremost on your needs as a trader. Keep in mind that the broker you trade with is just as important as how you trade forex, so pick a reputable and well-regulated broker you can trust with your margin deposit and any trading profits you happen to make.

Consider the following prior to choosing an online forex broker to trade.

Strict Regulation

The most important factor to take into account with any forex broker is the quality of its regulatory environment. Any online broker should be strictly overseen by a major financial regulator such as the National Futures Association (NFA) or the Commodity Futures Trading Commission (CFTC) that oversee U.S.-based forex brokers. 

Decent Trading Platform

Online forex brokers typically have their own proprietary trading software known as a trading platform. Many brokers also support the very popular MetaTrader 4 or 5 trading platform developed by MetaQuotes. Good trading platforms offer trading from charts, comprehensive technical analysis features, a high-quality news feed and a customizable interface. Some platforms like MT4/5 also support automated trading and custom technical indicators. 

Type of Broker

Online brokers have different business models. Some act as market makers by taking the other side of your transactions and are usually compensated by the dealing spread. Other brokers pass your trades through an electronic communications network (ECN) to provide you with the best possible execution price in their network and may charge a small commission or fee for facilitating the transaction.

Leverage Ratios

The amount of leverage you can access determines how big a trading position you can control, which can affect the size of both your profits and losses. Leverage ratios differ significantly among online forex brokers since some will only let you trade with a ratio of 50:1, while others will allow you to operate with a ratio of 3,000:1. 

U.S.- and EU-based brokers usually only permit clients to use lower leverage ratios of 50:1 and 30:1, respectively. Make sure your broker supports larger leverage ratios and you have tolerance for the higher risk involved. 

Dealing Spreads and Fees

Active traders like day traders and scalpers should be especially sensitive to the width of market maker dealing spreads, as well as any trading commissions or fees charged by an ECN broker, since they can add up over time and impact your success as a trader.  If you are a long term or relatively inactive forex trader, then you may not be as concerned by such things. 

Account Type

Most brokers offer different account types that depend on how much money you initially deposit. In general, demo accounts require no deposit since you trade with virtual money, Micro accounts are for those who trade in smaller amounts, standard accounts are designed for most traders and VIP accounts require the heftiest deposits but provide additional perks and services that other account types do not.

Also, many brokers now offer Islamic accounts that lack swap fees on overnight rollovers if you need to conform to Sharia Law. 

Customer Service 

You typically benefit from quick access to customer service staff just in case an error occurs or a problem arises that could cost you money. Most brokers offer services in English and several other supported languages and usually provide access via live chat, email, phone and fax. 

Educational Materials, Research and Tools

You may benefit from educational resources provided by your broker, which can include online courses, e-books, webinars, tutorial videos, blogs and articles. Some brokers also offer market reports and newsletters written by experienced fundamental and technical analysts. They may also provide an economic calendar and other research materials and tools to make trading easier.

How to Start Trading Forex in Kenya

Many foreign online forex brokerages allow clients to trade with them from Kenya, so work through the following steps to get started.

Step 1: Assess Your Requirements

Ready to pick the best forex broker for you? First, determine your requirements. For example, you might have a particular preference for a trading platform, like the popular MetaTrader 4/5 software that has many custom indicators and automated trading programs known as Expert Advisors (EAs).

Take into account the size of the initial deposit you can afford to make since some brokers require much larger minimum deposits than others. Keep in mind that this money should generally be risk capital that you can afford to lose.

Finally, estimate the amount of education you will require to be successful as a forex trader. Simply knowing how to enter orders on buy and sell currencies is not sufficient since you need to learn when to do those things to stand the best chance of profiting from your trades. 

Step 2: Pick a Broker

It may be a better idea to select a reputable foreign broker to avoid the risk of fraud. If so, remember to choose one that submits to strict oversight by a major regulatory agency. 

FOREX.com is the largest U.S. forex broker and is strictly overseen by the NFA and CFTC regulatory agencies. It offers competitive dealing spreads on major, minor and exotic currency pairs entirely free of commission.

The broker also provides an Advanced Trading Platform with over 50 technical indicators as well as MetaTrader 4/5. Traders can also operate in futures and precious metals and the maximum leverage ratio allowed for currencies is 50:1. 

Step 3: Open an Account

Once you’ve found an online broker that meets your needs, consider opening up a demo account to test out its transaction services, execution speeds, dealing spreads and order slippage. You can also use this type of account to practice trading and test a trading strategy. 

Choose the broker you like best by filling out its paperwork, provide required documentation and fund the account using one of the deposit methods the broker supports. 

Step 4: Start Trading

Next, you’ll need to open a trade box for a particular currency pair. Select whether you prefer to buy or sell and then enter an order. Simple orders you can generally enter include: 

  • Market orders, executed immediately at the current market price.
  • Stop orders that are executed when the market trades at a particular level worse than the current market. 
  • Limit orders that are executed at a particular level better than the current market. 

Remember to follow money management principles when trading so you can size positions correctly, limit losses and protect profits. 

Forex Trading in Kenya Summary

Choose a well-regulated foreign broker like FOREX.com to help you avoid fraud when trading forex in Kenya. Consider selecting an online broker that supports CFD or futures trading and provides access to a variety of international stock markets if you want to trade other assets in addition to currency pairs. 

Interested in learning more about forex? Check out Benzinga’s guide on the best forex brokers for beginners or how to start trading forex.

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