Forex trading involves currency trading, in pairs, against one another. For instance, if you have been Abroad, at the current exchange rate, you may have changed your Nairas to the foreign country’s currency through your financial institution or currency changer.
A global and decentralized marketplace called the Forex market decides on this exchange rate.
At many times this environment becomes very competitive and extremely unpredictable, as currency movement tends to shift based on various macroeconomic indicators.
New investors should, therefore, exercise caution and be willing to take the risks involved, as your investments invested could deplete in a couple of minutes.
What is Retail Forex Trading?
Retail Forex trading basically means that Forex trading is available to retail investors/individuals. It accounts for about 5.5 percent of all market operations in Forex while the majority are major investors and institutions.
It had only been open to major financial institutions until a decade ago. But with recent developments in internet penetration, reduced transaction costs, strong liquidity, and greater market participant’s attention.
This has also opened up individuals / small investors from which they can access global currency markets and gamble on exchange rates by opening a Forex Broker trading account.
How popular is forex trading in Nigeria?
Retail Forex Trading in Nigeria has a daily trading volume of about 300-450 million Naira ($10-$15 m) according to certain estimates. It has recently begun to gain prominence among investors because many foreign brokerage firms in Nigeria have set up their outlets.
The Brokers inform new investors about the prospects of the forex market & the dangers associated with it. It is good to start trading via these brokers as they offer a variety of trading platforms like mobile & web and only need investment start-ups that are as low as N1,000. What you need is internet access & mobile phone; hence, many investors and average Nigerians turn to forex as a way of generating extra revenue.
There are local investor groups such as Online Forex Traders Association of Nigeria (OFTAN) that are working on enlightening students, newbies, helping investors to get into Forex and Also gaining investor trust in Forex through past attempts to control Forex Brokerages in Nigeria.
In addition, government agencies such as the Nigerian Central Bank and the Nigerian Securities Exchange Commission are working to create a regulatory system on the Forex market. According to their latest statement, this structure is currently in the drafting stage.
What to know before investing in Forex Market?
Choosing a reputable forex broker in Nigeria, if you are going to invest your money in the foreign exchange market, is of utmost importance. The Nigerian Forex setting is not unlawful but still unregulated so it still makes more sense to be extra-cautious when you put your money in the hands of someone else.
Begin by testing whether the broker is supervised by reputed international regulatory agencies worldwide. If your broker doesn’t have a presence beyond Nigeria, we suggest you refrain.
Once your options are narrowed down, it’s crucial that you have a passion for the payment platform. Most dealers offer a special ‘demo trading platform’ where you can literally trade without downsides with virtual money. If you like the system and feel comfortable, you can subscribe to’ Live Trading Portal’ where you can add your own money to sell.
Then it improves if you are able to test the historical spreads that various brokers sell. Spread is the fee which you pay to the broker whenever you trade. Chose the Broker offering the smallest spreads. Always, make sure the broker has excellent Customer Service. Don’t settle for any less. When you want to cash out your account, there’s just no reason a broker would make you wait.
First but most importantly, continue learning. Create your information on and how the market responds to the macroeconomic indicators. Just spend the sum you’re willing to lose. Seek to reduce the losses by setting tight losses on stop. Let go of the envy and do well.
Forex trading is inherently extremely unpredictable. The continuously evolving macroeconomic factors can lead to rapid exchange fluctuations which can be devastating if you find yourself at the wrong end of the exchange.
Even the experienced traders are taking losses because of the amount of randomness the market is offering. It is, therefore crucial to have first-hand information before you even consider investing in the Forex markets.
Forex brokers are providing “Leverage” which literally means borrowing money from the broker to take a larger stand. For example, a 1:100 leverage means that you invest in only one unit but control 100 units in a trade.
While leverage can bring massive gains, it can also magnify the loss you are taking, and therefore the ability to easily wipe out your trading account.
Nigeria also has uncontrolled Forex trading but it is not illegal. This means that before those laws arrive, no one can support you if your broker goes bankrupt or fails to pay you.
Select a reputable broker that has a global footprint and is governed by prominent international financial institutions if you do want to trade. Be vigilant of brokers promising to offer big profits. Also test the broker’s credibility before putting in your money.