What is Forex?

The Foreign Exchange (FOREX) market is by far the largest market in the world. The $4 trillion average daily turnover dwarfs the daily turnover of the American stock and bond markets combined.

There are many reasons for the popularity of foreign exchange trading, but among the most important are:

  1. The available margin trading
  2. The 24-hour a day 5 days a week liquidity
  3. And low if any commissions.

Of course many commercial organizations are participating purely due to the currency exposures created by their financial institutions accounts on their import and export activities.

Investing in foreign exchange remains predominantly a domain of the big professional players in the market such as hedge funds, banks and brokers.

Nevertheless, any investor with the necessary knowledge is and complete understanding of this market can benefit from this exciting arena.

What is Currency Trading

Currency trading is done, when a trade off is made against the strength and weakness of two or more opposing currencies. For example the currency trading of the Euro against the US dollar or that of the Japanese Yen.

In order for a Forex trader to be successful in currency trading, he needs to look at the market trends and try to analyse where and in what direction he might think that the market is going to go.

There are many factors which can (and do) contribute to the daily currency trades being made, and these can have almost immediate effects to the currency trader. In the world of online forex  trading such factors could be:

  • The outbreak of war
  • Natural (sometimes called Acts of God, in insurance terminology) disasters such as hurricanes, earthquakes, typhoons
  • Secessions and the breaking of trade blocs as recently witnessed with Britain’s exit from the Euro bloc (Brexit)

All these factors impact directly on the supply and demand of currencies and commodities. For example, war could interfere with the supply and delivery of crude oil. Terror acts also play a role in currency trading. Although, traders today, and after 9/11 tend to take such things more in their stride now, and the currency trading markets usually correct themselves pretty quickly today.

In internet forex trading, an exchange rate represents the value of one currency against that of another. An exchange rate fluctuates over time.

The US dollar is the most traded currency in the world and we can look at the value relative to a third currency, which may be obtained by dividing the US dollar rate for that of another.

For example, if there a 120 Japanese yen to the dollar and 1.2 euros to the dollar, then the number of yen per Euro is 120/1.2 = 100.

The magnitude of numbers is not, by themselves, indicative of the strengths or weaknesses of any particular currency. Meaning that the US dollar could be rebased tomorrow, so that one new dollar was worth one hundred old dollars.

All the numbers, in the table, would be multiplied by one hundred – this does not suggest, however, that all the world’s currencies just got weaker. One way or another, currency trading is almost as old as mankind itself.

What is Margin Trading?

Foreign exchange trading is normally undertaken on the basis of margin trading or gearing.

A relatively small deposit is required in order to control much larger positions in the market. This is possible because when you buy one currency you sell another.

Margin requirements are set by your broker and vary from as little as 1% to 10% margin.

This means that in order to trade 1,000,000 USD on 1 % margin, you need to place just 10,000 USD by way of security.

That same security of 10,000 USD, traded on a 10% margin could control up to 100,000 USD worth of one currency against another currency.

5 Incredible Tips That You Must Master to Be Successful in Forex Trading in Kenya

There are two type of investors in the forex market. Those who learn all there is to learn about the market, and those who approach forex trading as if it was a gamble. They do not take their time to learn. To them, investing in forex is not so much unlike spinning the roulette. They click blindly on the charts and wait for Lady Luck to bless them with profits.

Wrong approach. Traders who do not learn end up making massive losses.

If you want to separate yourself from this sad group of ‘trader’s, you should take your time to learn how the forex market operates.

Here are 12 most important things that you should take time to learn:

1. Develop Your Trading Plan

By failing to plan, you are planning to fail- Benjamin Franklin

I’ll illustrate the importance of having a trading plan with situations that I encounter almost on a daily basis.

When new traders discover an uptrend in the market, they usually ask something like, “ The EUR/USD is on an uptrend, where should I enter the market?” My reply is usually, “What amount of risk/reward ratio are you willing to place on a trade?”

This reply catches them by surprise. Most forex traders in Kenya concentrate so much on being right and forget that they could be wrong. The market could go against you or it could hit a top and turn right back.

Without a trading plan, it means that you do not know what to do not only if a trade goes against you, but also when a trade goes your way. Big profits on paper could turn into massive loses when you do not have a trading plan.

Here are a few important points that I use when developing a trading plan. Feel free to borrow from the list when you are developing your own trading plan:

  • I always make sure that I know where and how to enter the market.
  • I always know what amount of money I can put to risk on any particular trade
  • I know when to leave if the market does not go my way
  • I know how much profit I am expecting from every trade if I am right
  • I always protect my profits by placing a trailing stop loss on my orders

These are just but a few of the things that go into developing a trading plan.

2. Have an Aggressive Money Management Strategy

Money management is one of the most important aspects of online forex trading. It is the one thing that will make or break your career as a forex trader. Unfortunately, a lot of traders enter into trades without taking money management into consideration.

If you are serious about trading, you have to learn how to manage your money.

Good money management starts way before you open a live trading account. It should start even before you are trading on a demo account. Good money management should start when you decide that you want to invest in online forex trading.

How, you ask?

Suppose that you had $20,000 that you have decided is a good starting capital for your online forex portfolio, would you put all the money on your forex trading account? You’d be putting yourself at an aggravated risk by doing so. What happens next if you lose all the money in the account for whichever reason? What if your forex broker goes broke bankrupt, closes the company and never pays back your money?

Or what happens if you accidentally take a 20 lots position and forget to set a stop loss?

If $20,000 is all you have to start trading, you should consider opening an account with a maximum of $1000. You can always inject more money into the account as you see necessary or when you have gained substantial trading experience.

The second most important factor to consider when managing your money is leverage. While it is possible to get accounts with leverage as high as 1:500, a huge leverage is a double-edge sword and usually a reserve of seasoned and aggressive forex traders in Kenya.

As a general rule of thumb, you should never risk more than 2% of your account in any one single trade.

Learning the art and science of money management will determine how you prosper in forex.

3. Make use of stop loss orders

With so much activity going in the forex market and so many a facets of setting up a trade, it is sometimes possible to forget the small things like setting protective stop loss orders on your trades. Apart from mitigating your losses, a stop loss order also lifts the burden of monitoring your trades from you. With proper stop loss orders, you can set up your trades and move on to other things, leaving your trade to play.

What is a stop loss order?

Trading online forex with your real hard earned cash is a serious business, and it should be taken seriously. As such, you should take time to familiarize yourself with the different trade management tools that you have at your disposal.

A stop loss order is an order that you place on your active trades to prevent further losses. The stop loss closes your position in case the market moves against you and reaches your specified level of acceptable loss.

As an example, if you decide to go long on the USD/JPY at 109.58, you could set a stop loss at 106.58. If the market goes against you and reaches this level, your trade would automatically be closed, preventing further losses.

Most importantly, a stop loss order eliminates one of the hugest barriers to trading: emotions. Many traders tend to fall in love with their trades, believing that the trades will turn around. They hold on losing positions for far too long, and pay dearly for it.

To become a successful forex trader, you have to learn not only how to place stop loss orders on your open positions, but also where to place the stop loss orders. To tight of a stop loss means that your stop loss will be hit by the slightest drawdowns or noise in the market, while spaced out stop loss orders could lead to insufferable losses on your account. The art of the stop loss is one of the main lessons we teach traders during our paid training sessions.

4. Close your profit-making trades at the right time

Closely related to the art of putting stop losses on your trades is the art of taking your profits at the right time. One of the biggest blunders among new forex traders is that they take tiny profits too soon but allow their losing trades run.

When is the right time to take your profits?

The right time to take your profits will be dictated by your trading plan. Before you enter your trade, you should have a predetermined entry and exit points. This reduces the impact of emotions on your trades.

Your trading style also determines when you should take your profits. For scalpers, taking profits as soon as possible is an excellent strategy, but if you are a swing trader, you might want to let your trades run for longer.

5. Exercise Proper Trading Discipline

A lot of forex traders in Kenya end up burning their accounts not because they were not trained properly in the forex course, but because they lack the proper trading discipline. It is hard to become a successful forex trader unless you learn how to be disciplined, how to stick you your trading plan and how to substract emotions from trading.

One of the best exercises to help you develop stellar discipline is to watch the markets the whole day without taking a trade, even when you have an excellent entry set up. Repeat this several times every month and you should be on your way to becoming the next successful forex trader in Kenya.

Beginner Tips and Tricks for Trading Forex on a Demo Account

The best way for beginner forex traders to become acquainted with the forex market is to trade on a demo account.

But where do you get a free demo account to practice trading?

Don’t sweat the small stuff. Many forex brokers offer a free demo/practice account. To access the demo, you only need to sign up on the broker’s website for free, and you are good to go.

Practice or demo accounts are funded with ‘virtual money’. You are free to use the virtual money to place trades in the market. Any profits made on a forex demo account cannot be withdrawn, neither can loses be debited on your account.

Why Demo Accounts?

Practice accounts give you a great opportunity to experience the live forex markets without putting any of your money at risk.

  • You can analyze how prices change in different times of the day
  • You can see how the behavior of different currency pairs differ from each other
  • You can see how the forex markets reacts to different news releases
  • start analyzing charts and improve your understanding of how margin and leverage work
  • You can use a demo forex trade account to strengthen your strategy before putting it live

Using a demo account, you can start trading in real market conditions without the fear that you are going to lose money. If you are looking for experience in forex trading, a demo account is what you need.

Demo/practice accounts are also an excellent way of testing how a certain broker’s platform works. Unfortunately, there is one thing that you can’t simulate on a demo trading account: the emotions of trading. To get the best out of your trading account, you will have to treat it as if it contained your hard-earned money.

Getting Started With a Demo Account

I assume that you have already signed up with a forex broker of your choice. If you haven’t, I recommend you do so right now. Here are our recommended partners.

There are two broad ways that you can trade forex on the markets. You either place direct orders using a click-and-deal featured on the MT4 or you employ orders to be executed when the market meets certain conditions.

Placing Click-and-Deal Orders

Many forex traders love trading the market at its current positions (click-and-deal orders). They love the certainty of knowing they are in the action as opposed to placing an order that may or may not be placed. This ‘live activity’ is part of what makes the forex market so alluring. It is like sitting in a room full of stock brokers shouting their orders (think the Wolf of Wall Street!)

Most forex brokers provide trading platforms that give you the live stream of currency prices in the market. These platforms will allow you to place a trade with a single click of your mouse button.

To place a trade on such platforms,

  1. Specify what amount you want to trade
  2. Click buy or sell

The forex platform will respond instantly, mostly within a second or two. If the trade went through, you will receive a popup notification and your MT4 will update to show your open position. If the price changed in-between you placing the order, the platform will notify you that the trade did not go through.

The order might also fail to go through if your trade is larger than the margin allowed. In this case, you will need to reduce your trade size and try again.

One important thing to keep in mind when trading on a click-and-deal platform: Any action you take on the platform is your sole responsibility. You might have meant to click “Sell” instead of “Buy”, but no one knows for sure, except you.

Using Orders on a Demo Account

Orders are an important part of the forex market. They are trades waiting to happen. Savvy forex traders use orders to catch market entry points that would otherwise elude them when they are not in front of a trading screen.

Recall that the forex market is open for 24 hours a day, 5 days a week. A market move is as likely to happen when you are in front of your screen as when you are deep asleep. If you have a daytime job, market moves are also most likely to happen when you are deeply engrossed in your boss’s menial work.

Orders are how you are able to capture market moves and enter trades when you are not in front of your trading screen.

But orders are have more uses than simply capturing market movements when you are asleep. I can’t emphasis the importance of using orders strongly enough. In a highly volatile market, using orders can help you capitalize on quick market movements while limiting the impact of negative market moves on your account.

Common Forex Market Orders

There are many type of orders available in the forex market. However, all orders are not available with every online broker. Before you sign up for a forex account with your broker, you will need to verify whether they offer all orders that you might want to place during your trading career.

Take profit orders

Don’t you just love the name!

Take profit order are used to lock in the profits that you have already accumulated on a trade.

Limit orders

A limit order is an order that triggers a trade at a more favorable price than the prevailing market price. A classic example of a limit order would be “Buy low, sell high”

Stop loss order

This one doesn’t sound so good, does it? But don’t ignore it. Among all orders, the stop loss order carries more significance and is critical to your success as a forex trader in Kenya.

In their most conventional use, stop loss orders will close a trade that is losing money. In your case, you’ll be using stop loss orders to limit loses to an acceptable threshold. If you do not set stop loss orders, you are leaving your account at the mercies of the market, which is nothing short of financial suicide.

Trailing stop-loss orders

One of the keys to successful forex trading is limiting the size of your loses while exponentially maximizing your profits.

The best way to do this is to let your winning positions run and stopping your losing positions. A trailing stop-loss order does exactly that. It will adjust its order rate as the market move, but only in the direction of your trade. For instance, if you are long CHF/CAD at an entry of 1.5750, and you’ve set a trailing stop-loss order at 30 pips, the stop will first become at 1.5720.

If the CHF/CAD moves higher, the trailing stop adjusts itself, pip for pip. It will continue to adjust higher as the market moves higher. If the market reaches its peak, the trailing stop will be 30 pips below the top. If the market ever moves down by 30 pips, your trailing stop-loss will be triggered and your position will be closed.

To the savvy Kenya forex trader, a trailing stop is a powerful order.

One-Cancels-the-Other Market Orders

Also commonly referred as OCO’s, a one-cancels-the-other market order is a stop loss order paired with a take profit order.

An OCO is an incredible insurance to a savvy forex trader. All positions remain open until one of the order levels is hit. When one order level is triggered, the other one is simultaneously closed.

For instance, if you are short on USD/JPY at 117.00 and you believe that the currency will keep moving up once it hits 117.50, you’d place your stop loss order at that point. At you then place your take profit here.

The above scenario has clearly marked out your playing field. If the USD/JPY keeps playing between 117.49 and 116.26, your positions will remain open. Conversely, if the market hits 116.25, your take profit order is triggered and you walk away smiling. If 117.50 is hit first, you’ll suffer some clearly pre-demarcated loss, nothing to worry you so much.

OCO orders are highly recommended for every order you have open in the market.

Managing Trades on a Demo Account

At this stage, you have placed orders and placed all the requisite orders. Is it time to sit back, relax, and watch the market do its thing, right?

Not so fast, amigo.

The forex market is not some form of gamble where you roll the dice and wait for Lady Luck to smile upon you; it is a dynamic environment where variables that influence your trades are constantly cropping up. These variables alter the way prices develop and render previous price expectations null.

A lot can happen between the time you set up your trades and the time they hit their targets. Forex trading is not a set-it-and-forget it kind of a thing. You need to keep abreast with market developments.

Easy Forex Review

As the Kenya Forex Firm always does, I am delighted to be bringing you information about forex trading that you won’t find anywhere else on the internet.

Today, I will be reviewing one of the forex brokerage firms that is spending a fortune in Adwords advertising and in paying forex affiliates to get their word out there.

If you have not been living under a rock for the past few months, you might have heard of Easy Forex. What you might not have heard is whether all the hype about the brokerage firm is for real or there are skeletons hiding deep in the closet waiting to swallow you and your credit card in one single swoop.

So, in this review of Easy Forex brokers, I will be giving you the inner details about the forex broker who follows you everywhere like a shadow.

Who/What is Easy Forex

Easy Forex is a forex brokerage firm that is based in Cyprus, Greece (honestly, stop looking for a forex broker in Kenya. We do not have them in Kenya. The Central Bank of Kenya even considers it illegal to trade forex in Kenya!)

Easy-Forex has been in operation for the past 11 years, having started operations in 2003.

In my opinion (after thorough research and reading reviews from other forex traders) Easy-Forex is a well-rounded forex brokerage firm that is well suited for beginner traders.

The trading platforms supported by Easy Forex include Desktop MT4 trading, Mobile Platform Trading and Web Interface. If you are in Kenya, and you own a strong Android Phone, iPhone or tablet, there is not reason why you should not invest in forex trading now.

Minimum Operating Balance

One of the excuses that I get from my Kenyan friends is that they cannot afford the capital to start trading forex. Of course, many of them do not take the opportunity to research and find brokers who do not require substantial deposits to operate an account.

While many brokers require a minimum operating balance of $200, Easy-Forex has a minimum deposit requirement of a mere $25 (about 2500/= Kenya shillings). Now, tell me what is that if it is not cheap.

On top of that, Easy Forex offers 20% bonus on all deposits that you make up to $2000. I have heard that forex brokers who offer bonuses are scammers but I have been operating with such a broker and I am yet to have any issues trading or withdrawing my profits.

To get your 20% bonus deposit, click on this link when you are opening your account.

How to Fund Your Account

With Easy Forex, you can use your Visa or MasterCard Branded ATM Card (from whichever bank) to deposit the money into your account. Alternatively, if you already use online payment gateways, you can deposit funds via Web Money, Skrill or Neteller.

Note that the mode of funding you use will be the same mode through which you will receive payments. I therefore recommend that you use your ATM card or Skrill to fund your account.

Leverage

Leverage is what makes forex trading so lucrative yet so risky. With leverage, you can control trades worth thousands of dollars with minimal deposits in your account.

Easy Forex offers a maximum leverage of 1:400. That means if you deposit the minimum $25, you can control trades worth $10,000 (24 multiplied by 400). Your profits will be likewise magnified. So will be your losses.

Caution: If you are new to forex trading, I do not advise you to use such a high leverage. Start with a leverage of 1:10 or no leverage at all. This way, there is very little chance that your account will be wiped clean by a trade gone sour.

It is also important that you learn the basics of risk management and risk/reward ratio before you start using high leverage on your account.

Easy Forex Demo Account

A demo forex account is invaluable in your entire career as a forex trader. Unlike what many traders assume, demo accounts are not limited to newbies.

Whenever I learn of a new forex trading strategy or I want to test the viability of a new technical indicator, I use my demo account to simulate the real trade.

Easy Forex offers a demo account loaded with virtual (fake money) which you can use to practice and learn forex trading.

The only shortcomings with the Easy Forex demo account is that it is limited to 30 days only. There is however a cool way to lengthen the life of your demo account.

Open a demo account here.

Verdict