Reliable data have proved that more than 100,000 traders in Kenya who are now actively in trading in the Forex market and the number is growing.
How much money do I need to trade forex in Kenya?
Forex Trading in Kenya has grown during the pandemic, with more retail & professional traders entering the market.
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In fact, Forex trading in Kenya is so popular that many people have chosen it as a major means of income to meet their basic needs in life. A lot of young people are now drawn to it due to aggressive online marketing by brokers.
But currently, there are only a few forex brokers regulated by the CMA for accepting traders based in Kenya. Two more forex brokers were also regulated by the CMA in 2021.
Against this background, there is a need for education so that potential Forex traders out there will know the financial requirements and also the risks of forex trading.
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We will try to answer some of these questions: Is it a profession that is meant for just professional traders with huge capital? Can you engage in forex trading irrespective of your financial background? Do you need small money or big money? How much capital should you trade with?
Retail forex trading is regulated in Kenya
Before we get any further, it is important to know that forex trading is regulated in Kenya by the CMA.
One important factor that should give a trader confidence in forex trading in Kenya is the regulatory framework in Kenya. It is legal to trade forex & the market is regulated by the Capital Markets Authority (CMA).
The CMA which came into being in 1989, is responsible for licensing and regulating brokers with the aim of protecting traders against fraudulent and bad operators in the field.
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Choosing a CMA regulated Forex Broker is very Important
Anyone who has the necessary knowledge about trading & its risk can trade forex by opening a trading account.
But before discussing what it will cost you to trade in forex, you should bear in mind that your first task is to look for an online Forex Trading brokerage.
The safety and security of your trading funds should be the most important thing in your mind instead of looking for shortcuts. So, it is advisable to take your time to search for a reliable broker that is recognized and licensed by CMA.
Even if you want a local or smaller broker to serve your interests, you still need to take your time to look for a reliable one. On the CMA website, there is a list of licensees which include the non-dealing forex brokers that you can choose from.
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How Much Do I Need to Start Forex Trading?
As stated earlier, you will need an online broker first. The amount of money you need varies as it depends on the broker you opt for and the type of platform you decide to choose.
It should be noted that the majority of the forex brokers in Kenya require about KSh550 in order to get started as the minimum deposit.
Examples of regulated forex brokers that require as low as KSh550 include HotForex & FxPesa. However, traders should have it at the back of their minds that it will be very difficult to earn any considerable profits with such a meager amount.
If you want to make sizable profits in forex trading, the most reasonable Investment funds that you need to start with should not be less than $1000.
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But you should note that the higher the funds in your account, the more profit or loss you stand to make because you will be able to trade a higher position size.
Another important piece of advice for new beginner traders in forex trading is to only deposit as much money as you are comfortable losing.
Theoretically there is no limit on the amount of money you can earn with online forex trading and also there is also no limit on how much a trader can lose. So, bear this in mind before putting too much money into Forex trading.
Why you shouldn't trade with a small account
The amount you start trading with in forex trading matters a lot.
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We have heard the stories of about 80 per cent of new beginners who start with little but lose all their trading capital within the first few days or weeks of trading.
This development cropped up partly as a result of the issue of undercapitalization, and use of excessive leverage.
Unfortunately, some forex brokers in Kenya would not explain the disadvantages of undercapitalization & using excessive leverage to make up for it, some will even encourage a new trader to start with minimum deposits as low as $5 knowing that you can't achieve any tangible breakthrough with such a tiny amount.
There are three major disadvantages of trading Forex with a small capital.
First, it will put you in a tough position where you may lack enough funds to sustain drawdowns in the trading market.
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Secondly, it will be difficult to have the funds needed that will make you take advantage of profitable trading opportunities when they crop up. This will encourage you to use excessive leverage, which will make you lose your capital quickly.
Thirdly, trading forex with a little amount can lead to the risk of over-trading. Over-trading crops up when investors engage in too many trades so as to recover the losses from previous trades. This ugly development often leads to more losses.
The Importance of Trading with a higher Capital that you can afford to lose is that as a new beginner, starting with higher capital gives you a larger room to work with, which means a trader can take on larger trades without using leverage and there is potential to make more money while recording successful trades.
Whereas, if you have small capital, you will be tempted to use too much leverage to make up for the low account size. This could mean that you could lose your complete account on a single trade.
Also, the level of capital invested in forex trading has some psychological effects on the trader. For instance, if you begin with a meager capital, you will have the feeling that every trade is a matter of life or death. However, with higher capital, you can be confident about taking more risk and would not worry much about individual trade. This can lead to positive effects on your trade.
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However you can still have a bad experience by putting much money in a forex account. If your account balance is too high and you are not careful, you may become overconfident and take on excessive risk with each trade. This may make you experience heavy losses.
The antidote is that, in general terms, a trader should use an amount of capital that will make him comfortable, but not too overconfident. Any only put any money that you are willing to lose.
Minimum Deposit of Some Forex Brokers in Kenya
The CMA has licensed six non-dealing brokers to operate in Kenya. A summary of their minimum deposit requirements is given below:
- Pepperstone is a brokerage firm that was founded in 2010. The minimum deposit required by the firm for traders is KSh550.
- Scope Markets was founded in 2014. The minimum amount of deposit required is KSh550.
- Windsor Markets has a minimum deposit is KSh550 and a maximum leverage of 1:50
- HotForex was founded in 2010. The maximum leverage is 1:1000. The minimum deposit required is KSh550.
- FXPesa by EGM Securities was founded in the year 2019 & has a minimum deposit of KSh550.
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Trade on a Demo Account
Another important factor you should take note of is that your broker should have a free demo account for practice.
This is essential because the practice period will help you gain considerable familiarity with the broker’s platform. In the course of practice, you will acquaint yourself with knowledge of how to open and close a position.
You will also have the opportunity to learn how to deploy technical indicators, test strategy, manage risk & rewards, and ultimately, learn how to make profits.
After opening an account and your information and data have been approved, your broker will require you to fund your account. You can start small, and once your confidence has been boosted, you can then have the thought of adding to your account balance.
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While making your first trade, note that your main mission is to find favorable trading situations where the odds can be working in your favour.
It is very important to understand that nearly 80% of the traders lose in CFD & forex trading. And there is a high chance that you will also lose. So, you must not risk any money that you cannot afford to lose.
Also, have a very clear strategy for managing risk so that you don’t lose your capital & never risk more than 2% on a trade.
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