How to start forex trading in Nigeria
Why Forex Trading Is Popular in Nigeria ?
Nigeria is home to over 186 million inhabitants, making it the most populous country in Africa and the seventh most populous in the world. The population is anticipated to exceed 250 million by 2050, while the country is already home to the third-largest youth population as well as the twentieth largest economy in the world.
It is clear that Forex trading is legal in Nigeria if you trade your money for your personal benefit alone. This mirrors retail trading regulations in most countries. Raising capital from third parties for their benefit without a proper license to do so is illegal and, tempting as it may be, can get you into trouble if the third parties become dissatisfied and complain. Forex trading where you are managing other people’ money is extremely challenging psychologically. For these reasons, please trade only with your own money where losses are not catastrophic to your ability to pay your essential costs of living.
Steps to start trading forex in Nigeria for beginners:
- Learn the basics of Forex Trading
- Learn about the different Currency pairs
- Choose a broker & open your Forex Trading Account
- Learn the different Forex Trading Strategies
Learn the basics of Forex Trading
What is Forex Market?
Forex refers to Foreign Exchange , or simply FX , sometimes even called Spot FX, where the global currencies are traded against each other.
You may have seen ticker symbols of currencies like USD/NGN, EUR/NGN etc. while visiting your bank. These are the rates of the currencies from the live Forex market.
Forex is the most liquid market in the world, operating 24 hours a day, nearly five and a half days in a week. The global daily average trading volume of this market is over $6.5 Trillion, making it the largest financial market in the world. The number is so big that a big Stock exchange like a New York Stock Exchange (NYSE) has to operate for about a month just to catch-up to the Forex market’s daily average volume.
Have you travelled abroad to another country?
If you been to a foreign country, then it is likely that you may have converted your local currency i.e. Nigeria Naira (NGN) to another currency like Euro or a US Dollar. If you exchanged your currency before, then you have already traded in the forex market.
Let's assume that you exchange NGN15,000 for $1000 through your bank or local regulated exchanger, for travelling abroad to US. In this example, you would be physically selling your home currency ( Nigeria Naira ) for buying US Dollar. When you are exchanging your money for travelling abroad, you (through your bank) are making a forex transaction in the global forex market without even knowing
Learn about the different Currency pairs
What are Currency Pairs?
Currency Pair is the quote of one currency relative to the other currency. In the Forex market, all currency are traded against each other, therefore being called 'currency pairs'. So when you are trading in the forex market you are actually trading 2 currencies simultaneously.
Currency Pair Terms:
1) Base & Quote Currency: In every currency pair like EUR/USD, USD/NGN, the first currency mentioned is the ‘Base Currency’ which is being compared to the second currency called ‘Quote Currency’.
2) Bid & Ask prices: 'Bid price' is the market price at which you can sell the base currency. And 'Ask price' is the price at which you can buy the base currency in the pair.
3) Spread: Spread is the difference between the ask and the bid price. This is the fees charged by the forex brokers for each trade trade, and it depends on the market liquidity, and the currency pair that you are trading. The lower the spread, the better it is for you.
4) Pips: Pip stands for Percentage in Point, and it is the most common term in forex trading. Simply put, 1 pip is the smallest measure at which the market moves. It is normally the change/fluctuation in points of the last decimal for a currency pair.
Choose a broker & open your Forex Trading Account
1- Open Trading Account with a Regulated Forex Broker
The first step to start trading forex is to choose a reputed & regulated forex broker, and then open an account with it. Choosing a 'good' broker is an important step because the broker plays a pivotal role in your trade.
Top 8 Forex Brokers in Nigeria
Here are the April 2021 best forex brokers in Nigeria by forex trading category
1.FXTM – Best Forex Broker in Nigeria
2.Hotforex – Best Regulated forex broker
3.OctaFX – Low spread forex broker with commission free local deposits & withdrawals
4.XM – Forex Broker with Fast Order Execution
5.Exness – Low Minimum deposit & spread as low as 0 pips
6.Avatrade – Fixed Spread Forex Broker in Nigeria
7.Alpari – Good ECN broker in Nigeria
8.IC Markets – True ECN Broker
2- Understanding Forex trade
We will first dive into some important terms that you would need to know while placing your trade.1. Lot Sizes
4. Stop Loss
3- How to place a trade in forex market?
1. Buy Order in Forex
2. Sell Order in Forex
Nigeria Forex Trading Strategies
This lightning fast strategy attempts to skim just a few pips (basis points) off of each trade. If you are a scalper, you may only hold a trade for a second or 2 before exiting. You should have a working knowledge of indicators, and you need a fast trading platform and Internet connection with no latency timing is everything in scalping. This strategy relies more on a knowledge of how charts move rather than the fundamentals pushing the long-term movement of currency pairs.
A forex day trader performs intraday trades and is in all cash by the end of the day. Day traders want to avoid large overnight moves. This is less of an issue in the forex market because it trades 24 hours a day. However, traders can still avoid the weekend pause with this strategy. Day trades may last for the entire trading period or can last for only a few seconds.
Potential trading is also known as long-term trend trading. These traders are looking for large shifts in the price of a currency pair. If you’re a patient trader who doesn’t care about small, short-term chart moves, this type of trading may be for you. You’ll need to have a good knowledge of market fundamentals and the infrastructure of the individual currency you’re trading.
Swing positions look to profit from short-term moves. These positions may be held for a number of days, but they don’t have to. Swing traders may need to understand the fundamental macroeconomics behind a currency pair in order to make money. Because the potential time frame of a swing trade is longer than a scalp or a day trade, news items and macroeconomic conditions can exercise more influence over them.
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