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Forex Trade Risks and Pitfalls: Part 2 (Volatility)

This is the second part of our forex trade risks and pitfalls tutorials. You can read the first part of this series here. If you would like to continue receiving tips on how to trade forex in Kenya, consider joining our newsletter.

Understanding Volatility and How it Poses a Risk to Your Account

Just like human beings, the forex markets have certain traits and behaviors that can be observed and studied to better understand them.

Volatility is the measure of how much a currency fluctuates. If a currency shows high and erratic fluctuations, it is said to have a high volatility.

Volatility is one of the easiest ways to gauge exposure to risk. By looking at the recent volatility of a currency pair, you can gauge how much risk you will be exposed to if you decide to take a position.

However, volatility can also be a risk in and by itself.

Volatility spikes around news releases. If you understand that a major news release is due, and your account cannot afford a potential loss on the account, consider closing down your positions or scaling down the leverage.

Even if you are not a fundamental trade (i.e. you are not trading the news) it is important to be aware of the dates when major news releases come out and their potential impact on your portfolio.

How Does Volatility Affect your Account?

Swing forex traders view volatility as a negative as it represents risk and uncertainty. Contrariwise, high volatility makes the forex market more attractive to day traders.

Sudden and high volatility in a currency pair can make the price plummet below your stop-loss order. This leads to premature execution of stop loss orders.

For instance, if in a volatile market you placed your stop loss at 100 pips, and then the currency rebounds, it is possible that it will crash through your stop loss in no time at all.

Before you open a position in the forex markets, study the recent volatility history of the currency pair.

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#Francogeddon: Oanda Stands With Customers in the Wake of the SNB Shock

Various forex brokers reacted differently to the Swiss National Bank’s announcement that it had removed a 3 -year old cap against the Euro. The announcement, which sent the markets into a fray and was dupped #Francogeddon on the social media, caused incredible volatility and extreme ‘illiquidity’ in the markets.

Some brokers, such as the UK arm of Alpari, announced that they were folding operations due to the massive losses their customers incurred.  In many cases, the losses exceeded the investment/equity of the customers, forcing the forex brokerage firms to carry most of the losses.

Global Brokers NZ, another forex brokerage firm who folded operations in the wake of Francogeddon, said that many of its customers suffered loses that were more than their accounts’ equity, forcing the brokerage firm to bear the blunt of the losses.

The two forex brokerage firms have ascertained clients’ whose accounts were not affected by the Swiss Franc that they will get all their money back.

Amidst the Francogeddon Fray, a Glimmer of Hope

Other forex brokers are still trying to analyze the effect the Swiss Bank’s announcement had on their balance sheets, and there is a likelihood we will be hearing news in the tune of UK’s Alpari in the course of next week.

While the removal of the Franc-Euro cap was overwhelming to many forex brokers, some have been able to handle the announcement quite amazingly. A case in example is Oanda Brokerage Firm, which announced that they didn’t issue requotes on the CHF and that they had cleared all negative balances that customers who were on the wrong side of the trade had incurred.

Oanda’s announcement, which was carried in an email dispatch to clients, however, failed to verify whether traders who had bought CHF crosses would be paid.

“In the wake of this unprecedented market event, OANDA demonstrated its ongoing commitment to doing right by its clients. Despite suffering losses and vanishing liquidity in the institutional hedging market, OANDA remained true to its 14-year legacy of transparency, integrity and fairness to our clients. OANDA did not re-quote or amend any CHF cross client trades. We even took the further step of forgiving all negative client balances that were caused when clients could not close out their positions fast enough (where permitted by regulations),” the email read in part.

IronFx and HotFx also issued statements to the same effect.

A statement by IronFx read:

Iron Global Limited was not affected by these events due to our strong risk management systems and procedures and we continue complying well with our capital regulatory requirements under all regulatory bodies we have licenses. We would therefore like to inform our clients that we continue conducting our business as usual.

Hot Forex issued a similar statement:

We would like to reassure you that HotForex is operating as normal, and was not affected in any material way.Our strict Risk Management procedures minimized the impact of this event.

Furthermore, we have stayed true to our motto of Honesty, Openness and Transparency. As testament to our commitment to fairness, all negative account balances have been reset to zero and any clients that bought CHF have been paid in full.

 

 

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This is Best Strategy to Learn and Trade Forex in Kenya

Investing in forex trading is like taking that first step out of your mother’s house. You never know what to expect out there.

There are profits to be made in forex trading as well as massive losses to be incurred.

According to statistics collected by Market Traders Institute, a renowned online financial training institute, only 10% of those who invest in forex trading make profits. The other 90% get their accounts wiped out in less than 6 months.

The main cause of failure in forex trading is letting emotions such as fear and greed interfere with your trading. The next big reasons why investors lose money in forex trading is lack of solid trading techniques and strategies.

In order to sharpen your forex trading techniques, you need to learn how to trade forex before you commit your hard-earned cash to trading. There are several ways that you can use to learn forex trading. In this article, I address what I believe to be among the best ways to learn forex trading in Kenya:

  • Using forex EBooks

If you are interested in forex trading, getting an eBook on the subject should be the first step in learning. The reason why I recommend you start with eBooks is simple- You need to understand the theory behind forex trading before you start trading.

However, it is important to note that not all eBooks are equal. Some are low quality, spammy eBooks written by hungry forex affiliates who have never executed a single trade in their entire lifetime. Others are advanced eBook written by economists who have been in the forex market since it was established in 1973 and have lost sync with what a beginner eBooks should look like.

At KenyanPridespot, we constantly scrub the internet looking for the best ebooks on forex trading. We categorize the eBooks according to the knowledge level of a trader.

  • Using YouTube Video Tutorials

There is nothing as informative as seeing what you have been reading in forex eBooks demonstrated visually.

Again, you have to be diligent on whose channel you get the videos from. Like with ebooks, many forex videos on YouTube are recorded by forex affiliates who put their interests to sign you up to brokers for a commission ahead of your need to learn forex.

Trustworthy and well-established forex brokers and traders post the most informative forex videos. Some of the YouTube Channels I recommend you follow include FXStreet, Jason Stapleton and MetaStock. A little research on YouTube will also sharpen your acumen on other forex Vbloggers that you should trust.

The best way to use YouTube to learn forex is by using the search bar to constrain your search to one topic at a time.

For instance, if you would like to know how to read candlesticks, searching for “forex trading strategies” will be so wide. Instead, restrain your search to phrases that are directly related to information that you are looking for.

If you don’t want to do the hard work or your broadband is not strong enough to let you watch online video tutorials, we have a large collection of forex DVDs that are beginner-friendly and are categorized according to topics. Contact Patrick on 0710251380 to get your copy of forex training DVDs delivered right next to your doorstep if you are within Nairobi.

  • Simulating Trading on a Forex Demo Account

At this point, you should be aware of several trading strategies and techniques, and it is time to pilot-test them to see how practically useful is the information you have gleaned.

A lot of forex brokers offer free forex demo accounts that are loaded with virtual money that you can use to test-drive the trading strategies and techniques that you have learned on ebooks and video tutorials. I personally recommend that you open a demo account with XM Global Forex Traders.

A forex demo account offers the best chance of learning how to implement various trading strategies without actually putting your money at risk.

NB: Never upgrade to a live forex account unless you are already making profits on a demo account.

  • Join Forex Forums and Groups on the Internet

When you start trading on a live account, you will need to keep tabs on what other forex trading experts are saying. The information shared on forex forums offers great trading insights.

Additionally, being active on a forex forum gives you the feeling of being in a community of like-minded investors. Trust me; you do not want to barricade yourself in the house the whole day trying to make profits on the market.

Some of the best forex forums on the internet include Daily Fx Forex Forum, BabyPips Forex Forum and the OANDA Forex Forum. Make sure you check out these forums during your coffee breaks. There is a lot of information from individual members on the forums.

At KenyanPridespot, we are also in the process of organizing monthly meetups for all forex traders in Nairobi. These meetups will both be fun and insightful. Keep checking our website for updates on the first great meetup.

  • Hire a forex expert to train you

Up to this point, you might have noticed that all the various ways of learning forex I have recommended are free. They also involve you looking for the information personally. While these methods will greatly limit the money you have to spend learning forex, it also means that you might have to spend more time learning.

There is also the possibility that you are busy using your time trying to learn techniques that are no longer relevant in the forex market.

You might also prefer to have a mentor who will take your hand and guide you through forex training. If that is the case, you need to hire a forex expert to train you.

There are several individuals in Nairobi who offer premium forex training. The charges for these lessons usually range from as much as 20K to as low as 10K.

At KenyanPridespot, we have a forex training module for beginners that goes for only 8K. During the training, you will be introduced to forex trading, we will teach you technical analysis using various strategies, and show you how to manage risks in forex trading. If you are interested in learning, drop me a line on 0710251380.

P.S. Leave your comments below. Was this article helpful? What do you think is the best way to learn forex trading in Kenya?

 

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Forex Trading in Kenya: Overview Lessons on Online Forex Trade

 You have probably heard about the new business in town; online forex trading in Kenya. In fact, it has become so popular that it is threatening to overshadow every other online earning venture in Kenya.

Nairobi has the highest number of online forex traders in Kenya. But this number is still less than expected, more so considering the number of Kenyans who are asking questions about it. 

Needless to say, the trade is enjoying the limelight and will soon become one of the best investment opportunities for any interested person.

Here are just some of the very few benefits that you stand to reap by taking action to invest in online forex trade right now.

  •  Forex Trade Markets are Open 24 Hours- What this means is that you can adjust your lifestyle to trade at the hours that best suit you.
  • High Liquidity:-Forex trade is the most liquid trade in the world. Trades worth of trillions of dollars are traded daily. There are always traders on the look out to trade currencies in the market.
  • Free to Trade:- You can trade forex at no fees at all or at a reduced fee if you choose to use forex trade brokers (recommended). Many forex exchange brokers will provide you with a free demo account which you can use to familiarize yourself with the ins and outs of the forex trade.  Follow this link to open a free demo account if you would like to start practicing forex trade now.
  • Very Low Startup Capital:- You can start trading forex in Kenya with as little as $50 in your online account. That is less than 4K! This is possible through macro and micro forex trade accounts that are offered by some forex brokers.

How To Get Started With Forex Trading in Kenya

Before you read the rest of the article, I recommend that you have a look at the resources in the widget table below. They have been monumental in building my knowledge about forex trading in Kenya. Some of them are free while others are available in Amazon.Com for less that 500/=.

Additionally, investors who are early adopters are teaching people how to go start trading forex in Kenya. There are particular Kenyan Facebook groups, pages and blogs that have dedicated themselves to the subject of online forex trade in Kenya.

If you are one of the action takers in Kenya, you could be soon on the path to eradicating the financial instabilities posed by insufficient salaries, unemployment, aborted business ideas and unmet dreams by letting your money work on your behalf, which is what forex trade does.

In Kenya, there is actually no law prohibiting private online Forex trade. This is probably one of the reasons why it’s becoming one of the most lucrative businesses in Kenya today. Anyone who is interested with trading forex in Kenya can do so with the assuarance that there are no illegalities involved in trading forex in the country.

Now that most Kenyans are curious to learn more about forex trading, it should be the high time for you to go the same route.

If you are not sure where to begin, the next section of this article will give you the basics that you need to master in order to start trading forex in Kenya.

Step I:     Open an Online Forex Trade Brokerage Account

If you want to trade forex in Kenya, you will have to do so through a broker. This is basically a firm that handles the trades for you. You make your orders through them just like you do when trading stocks and securities at the NSE.

It is important that you research on different brokerages to find one that works best for you and is reliable. Doing your due diligence before you invest your money in forex trade also steers you away from the path of cons, scams and fraudster. I personally recommend XM Forex Brokers.

How to Choose Forex Trade Brokers

I have written a great guide on how to choose a forex broker in Kenya. If you have not done so, make sure that you’ve read it here.

Give these factors a consideration when selecting your forex brokerage firm:

  • Look for forex brokers who have been in this industry for many years, say, over 10 and have a good pack of experience. Experience simply indicates that whichever the company you have approached, it fully understands its job and treats its clients well.
  •  Check to confirm that the forex brokerage firm is regulated and its reputation is way up there. There are oversight bodies that are in charge of this. If the broker you selected voluntarily submits oversights to their government, you can have the confidence and assurance about its transparency and honesty.
  • See the number of products offered by the forex broker. In case the broker trades securities as well as commodities, for example, you know that the broker in question has a larger client base plus good business reach.
  • Read the forex broker’s reviews but make sure you are careful while doing this. In some cases, unscrupulous brokers may go into the sites and publish reviews boosting their standing and reputation. Reviews only give you a taste of the broker not what the broker really is. It’s a grain of salt.
  • Visit the brokerage website. The broker’s website must appear very professional, with active links. If you find anything like “Coming Soon!” or simply unprofessional looks, then you have no deal with that broker.
  • Check the costs incurred in transacting. Remember to find out how much you will be charged by your bank to wire money over to your forex account. Optionally, consider trading with a forex brokerage firm that allows you to fund your forex account using Paypal and other convenient online money transfer methods widely used in Kenya.
  • Focus carefully on the essentials. You require outstanding customer support, transparency and easy transactions. Gravitate towards brokerage firms that have a nice reputation.

Step II Request information for opening a forex account.

You can either open a personal account or select from managed accounts. With personal accounts, one can perform his or her own trades while with managed accounts, the broker you registered with will perform trades on your behalf.

Before you start trading with the brokerage firm you have selected, it is important that you fully understand the type of accounts that they operate.

What I personally do is ensure that I have contacted customer support with any little query or doubt that I have. It is my money that I am risking and the next thing I want is to walk into any business idea or investment blindly.

Step III Fill out the necessary paperwork.

You may request for the paperwork via mail or simply by downloading it as a PDF file. Remember to check transaction costs for getting your money into your bank account from that of the brokerage account. You never know the fees may cut into your hard earned profit so first find out on that.

Activation of your forex trading account. Usually, brokers send you emails that contain links for activating your account. Just click on the link and follow the simple instructions to get going with trading.

Step IV:  Starting Forex Trading in Kenya

  1.    Do an analysis of the market. There are several different methods you can try:
  • Technical analysis: This involves the process of reviewing historical data or charts to help you in predicting the shifts in currency with past events as the touchstone. You can make use of a trusted platform such as Metatrader 4 or just charts depending on your preference but the two will actually do the work.
  • Fundamental analysis: it involves analyzing a country’s economic base and deciding based on this factor.
  • Sentiment analysis: This type of analysis is in one way subjective. Ideally, you try analyzing the market mood in bid to figure out whether it’s “bullish” or “bearish.” While you may not on a regular basis put your fingers on the market sentiment, you may often guess well hence influence your own trades.
  •  Determination of your margin. You can proceed with investing little bits of money whilst making great profit advances. However, this largely depends on your broker’s laid down policies.
  •  For instance, if you need to trade10, 000 units at a 1% margin, the broker will ask you to deposit $100 cash in your forex account as security.
  • Any gains or losses increase or reduce the amount in the account. It is therefore for this reason that you are advised, as a general rule, to only invest 2% of your total ash in any particular currency pair even if it’s very profitable then.

Step V: Place Forex Orders Through Your Forex Broker

There are three different types of forex trade orders that you need to familiarize yourself with.

  • Market orders: With this one, you will instruct the broker to perform the transactions based on the current rate in the market.
  • Limit orders: The orders instruct the broker to perform a trade only at specific prices. For example, you may buy currency only when it reaches certain price(s) or simply sell currency in case it lowers to a specific price.
  • Stop orders: Stop orders are choices to purchase currency only when it’s above the current price in the market. This is usually done in anticipation of an increase in value or selling the currency anything below market price to lower losses.

Never at all get emotional. This is a volatile market and along your paths ups and downs will knock and wave. The only thing that matters here is doing your research very well; holding on to your strategy and watching your profits rise.

Do you have any questions regarding trading forex in Kenya? Always feel free to ask. We have an expert in the house waiting to tackle them all.

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Forex Trading in Kenya: 8 Incredible Tips for Day Traders in Kenya

Forex trading in Kenya is starting to take momentum. To keep you up-to-date on how you can invest in the forex trading industry in Kenya, we have lined up a series of lessons that will make you start trading like a pro. To make sure that you do not miss any of our forex trading lessons,  Press CTRL=D on your keyboard right now to bookmark this page.

If you would like thorough training on forex trading, make sure to check out our training modules, which are available here.

There are three main styles that you can choose from when trading forex in Kenya.

However, before you pick a style that suits you, you need to place several considerations into mind. The major consideration is your lifestyle.

Are you available to monitor the money markets throughout the day or are you only available during certain times? If you have a fulltime job, it may not augur well with your boss if he happens on you stealing time off to monitor the forex markets at work.

You also need to take into consideration the amount of money that you are willing to risk in forex trading. As a rule of thumb, never use money that you cannot afford to risk on speculative trading. For clarity’s sake, money you cannot afford to lose is money that will cause a noticeable disruption in your lifestyle if you lost it.

In this article, I discuss a forex trading concept known as Day Trading or short-term trading.

Why Day Trading?

Day Trading is for persons who have a lot of time on their hands. It is the easiest strategy of trading that does not involve too much technical analysis. However, you will be required to be in front of your monitor most of the time in order to place and close trades.

A lot of day traders use instincts to trade forex.

How to Start Trading Forex Market as a Day Trader in Kenya

If you are going to trade the forex markets using the short-term strategy (day trading) or what I personally refer to as guerilla trading, and what other forex traders refer as scalping or jobbing the market, you are going to need a few trading strategies.

Short-term forex traders enter into a trade and close it almost instantly. The longest that day traders hold a trade is a few minutes, typically less than 5 minutes. The main aim of scalpers is to benefit from only a few pips. In order to ensure that you are not losing your money as a short-term forex trader, you need to take into consideration a few factors:

  • Make sure you capture at least 3-10 pips to offset the spread

Many forex brokers place a spread of 2 to 5 pips on retail traders. In order for you to break even, you will have to put into consideration the spread at which you entered the market. You should also factor in the pip when considering the amount of loss you are willing to take.

Do not hold on a losing position hoping that the tides will soon turn to your favor. The most disciplined day traders have a position working for them or close it sooner than they can blink an eye.

  • Develop proper the short-term trader’s discipline

As a short-term trader, you need to have very high levels of financial discipline. Do not let your emotions cloud your judgment and obscure your objectives. If your main aim is to profit from only a few pips, then it follows that you cannot afford to lose more than a few pips.

  • Only trade in currencies with the highest liquidity

Liquidity is the greatest for a day trader. Currencies that are highly liquid are the most ideal for short-term forex traders. The liquid currencies include USD/EUR, USD/JPY, EUR/GBP, EUR/GBP, EUR/JPY and EUR/CHF.

These currencies have tight spreads and less impromptu price jumps. You can therefore make a prediction of which the side the market will be moving in the next few minutes.

  • Only trade during the peak hours of the forex trade market

Like liquidity, a volatile market is fodder for the day trader. The forex market usually peaks at European trading zone, which is around 9 a.m. to 7 p.m. Kenyan time.

At this time, the Asian and the American markets overlap with the European zone. Other time zones are not ideal for a day trader.

  • Focus your attention on only one currency pair only

For you to adeptly follow minute-by-minute price changes on the market, you need to narrow on only one of the most liquid currency pairs (see no. 3). Focusing on a single currency pair also improves your ‘feel’ and intuitiveness on the currency pair.

  • Preset your forex trading volume to save time

Time is of utmost importance to a day trader. To minimize the amount of time you spend setting up your trading options, consider presetting the trading volume that you will use throughout your day trades.

  • Choose your forex brokers carefully

To be successful as a day trader, you need to work with forex brokers who offer click-and-deal trading platforms. This saves you from delays that might be occasioned by execution orders.

  • Do not trade around the time data is being released

While data releases are a major ally to long-term traders, they do not augur well with short-term traders. Trading 30 minutes prior to a major data release is equivalent to tying a noose around your neck. The forex markets usually go into a flurry minutes before the release of such data.

That is it for the forex day traders in Kenya. Next, we shall be looking at the medium term forex traders in Kenya, and what you need to do to break even in the market.