Forex Trading in Kenya

Looking to start trading forex online in Kenya?

We have researched trustworthy and independent reviews of Forex brokers in Kenya. Compare the brokers based on our reviews, fees comparison, regulatations to make your decisions.

We have also created beginner forex guides to help you get started. So if you are looking to learn, then refer to our articles & tutorials on forex.

Featured Brokers

See our list of best rated forex brokers in Kenya that we have compared based 10+ factors - fees, regulations, withdrawal time, deposit methods, availability of multi-device trading platforms, support & more.

FXPesa Logo
FXPesa
  • EUR/USD Spread from 1.6 pips
  • Regulated with CMA
  • 66 currency pairs & 100+ CFDs on shares, commodities
  • Min. Deposit: $5 (Ksh. 508)
EGM Securities Logo
EGM Securities
  • EUR/USD Spread from 1.6 pips with Executive Account
  • CMA Regulated
  • 61 currency pairs & 28 CFDs
  • Min. Deposit: $200
Hotforex Logo
Hotforex
  • EUR/USD Spread of 1.2 pips with Premium Account
  • FCA, FSCA Regulated
  • Trade 49 Currency pairs
  • Min. Deposit: $5
XM Logo
XM Trading
  • EUR/USD Spread from 0.8 pips
  • ASIC Regulated
  • Trade 57 currency pairs & 1000s CFDs
  • Min. Deposit: $5

Our popular Forex Trading Resources for Kenyan Traders

How to Trade Forex in Kenya

We have created forex trading guides for beginners in Kenya. Learn how you can start trading & the understand the risks of CFD & Forex trading.

Forex Trading in Kenya for Beginners: Q&As

What is Forex Trading?

Forex trading is trading in different currency pairs with the aim to earn profit from the difference in the value of the currency pair due to market movements.

Also read: Our Forex Trading for Beginners guide

For example, let’s take the currency pair of Kenyan Shilling (KES) and US Dollars (USD). 1 USD is equal to 100 KES. KES is a not a strong currency like USD. Hence if we buy 5000 USD then we have to pay 500,000 KES. Now suppose the value of KES increases in the market. In that case, we have to pay less KES for every USD bought. That would also mean that for every USD you sell, you would receive more KES than you paid. This difference between the KES paid and received is the profit that you earn.

Hence forex trading is a profitable only if you know how to study the currency pairs and when to invest in which currency pair.

There are three types of currency pairs based on the volume of the trades in these pairs. These are Major, minor and exotic pairs. Some examples of these pairs are EUR/USD, GBP/USD, USD/KSH etc.

Buying and selling the right currency pair is very important to gain profit. When you start to trade, you must keep an eye on the changing exchange rate of different currency pairs as well.

How can you start trading forex in Kenya?

Capital Markets Authority (CMA) of Kenya has made forex trading in Kenya more regulated now.

To trade forex in Kenya, one could open an account with any of the forex brokers regulated and licensed by CMA. There are two such brokers who are regulated by CMA, EGM Securities and Scope Markets.

There are also global foreign regulated forex brokers accepting traders from Kenya - that are regulated with foreign regulators like Financial Conduct Authority (FCA), Financial Sector Conduct Authority (FSCA), Australian Securities and Investments Commission (ASIC) and the likes.

Almost all the brokers provide demo accounts. Demo accounts are copies of the real trading accounts and one can trade and understand the nuances of trade just like real trading account but it’s all dummy and nothing would hit the market in real.

For Live accounts, brokers can either be market makers or provide DMA (Direct Market Access) & DMA brokers are either ECN or STP. ECN (Electronic Communications Network brokers) is where the investors directly get connected to the other investors in the Forex Markets and the fee is calculated by the volumes traded by the clients that pass through the ECN environment.

STP or Straight Through Processing is where the broker passes the trades to liquidity providers for execution and gives access to interbank market structure. Even though having DMA gives you wider access to markets with higher rewards and risks, but finding true brokers providing DMA is difficult and tricky.

If you are a beginner, you should choose standard spread accounts only where the broker preferably offers STP accounts like in case of Hotforex. The expert traders can go for ECN account. These have low fees but commission is charged as per the trading lots.

What is Leverage in forex?

Leverage allows the investors/traders to gain exposure in the financial markets with a smaller upfront capital known as margin. This is effective because it leaves the extra money with the investor with which other investment options can be tried or can be kept for personal use. Leverage is given by CFD brokers.

Also Read: Our guide on Leverage in Forex Trading

For example, let’s take a trade scenario for EUR/USD pair, where we are buying EUR at 1.0840 (1 EUR = 1.0840 USD) by spending USD. Since forex trades generally take place in standard lots, which is 100,000 units of currency, we assume we are buying 1 lot of EUR.

Since any trade would require margin, let us assume the required margin is 2% of the trade value (which is 1.0840 * 100000 = $108,400). That would put the margin at $2168. Leverage is calculated by dividing the total trade value by the margin required. This would give us a leverage of 50:1. In case the EUR value appreciates by 100 pips to 1.0940, closing the trade by selling the bought EUR would give us a profit of $1000. With 50:1 leverage, our return on capital is 46%. However, if a broker provides a higher leverage of, say, 100:1, our margin requirement then would be as low as $1084. With the 100 pips appreciation in the market, we still make $1000 profit but now our return on capital would be 92%.

Hence, we are able to trade and profit more with less capital but high leverage. Most investors look for high leverage offerings but one should understand that high leverage also increases the risks of high losses in case of negative trades.

Note: Leveraged forex trading is risky & hence you should not use more than 1:10 leverage.

How much do I need to start trading Forex?

Many brokers offer a lot of options when it comes to opening accounts with them. All these accounts require a minimum account balance. The minimum that is generally offered by many brokers is $5 (with Hotforex, FXPesa Kenya & XM Trading) but we recommend that it would be better to open a trading account with a minimum of $500. This would ensure that a sizeable position could be taken in trading and a good profit could be earned on positive market movements.

However, it should be kept in mind that a position would depend on the balance maintained and the leverage offered by the broker. It is generally advised that a day trader shouldn’t risk more than 1% of their forex account on a single trade. That means, if your account contains $500, one should not risk more than $5 per trade. Trading positions also depend on the lot size that one opts for. One can trade in Standard lots (100,000 units), Mini lots (10,000 units) or Micro lots (1000 units). If USD is listed second in the currency pair, like EUR/USD or AUD/USD, and your account is being funded in USD, the value of pip per lot type is fixed. Hence, value of one pip for a Micro lot, a Mini lot and a Standard lot is $0.1, $1 and $10 respectively. Knowing this information is very helpful as this would help in determining the level of risk one can take and what position to take in the trades.

Let us assume we have $500 in our account and would like to trade on Mini lots for EUR/USD, currently at 1.084. The broker offers a leverage of 100:1 and 0.4 pips in spread for the EUR/USD pair. One Mini lot of EUR/USD can be bought with $108.4 of capital (1 Mini lot = 10,000 units * $1.084 = $10840 / 100 leverage = $108.40). With $500 in account, we take up a position of 40000 units or 4 Mini lots of EUR/USD pair, resulting in total capital invested be $433.6. With a positive movement of 1 pip in EUR/USD, we would gain $1 per lot. Hence, the total gain on our position would be $4. From this, we reduce the broker’s spread of 0.4 pips per lot to reach out net profit of $2.4 on our position of 40,000 units.

Starting out with a moderate amount of capital like $500 gives you the flexibility to trade as trading with very low capital & using high leverage is very risky. Generally, the very liquid forex pairs have changes in the range of 100 of pips. So, one can generate a good return if you invest wisely with low leverage. However, the risk appetite should also be kept in mind.

What are the risks of Forex trading?

Forex trading have very high risk factors. Some of the risks of forex trading are:

Volatility: Forex deals with exchange rates and currency pairs. Forex market is quite volatile. As per the global financial markets, the fluctuations in exchange rates could be various economic, geopolitical, social, etc. factors. The currency pair which can give a profit today may incur a loss tomorrow. Therefore, to cover the volatility risk, one has to study the exchange rates and currency movements very carefully.

Poor Risk Management and High Leverage: In forex trading, the risks of incurring huge losses should be covered using hedging instruments like derivatives. High leverage means trading on the capital which is not owned or is borrowed. So, if the leverage is high then the losses on that becomes a double burden on the investor to pay off.

Risk of Unregulated Broker: Regulated brokers provide a guarantee of your money being used for your trading only & reduces the risk. The unregulated broker can use investor’s money for wrong purposes and may mis-lead the inventors with fraudulent schemes. To safeguard the money invested and to cover oneself from any fraudulent practices, one must always trade with regulated brokers.

Unpredictable markets: The risk-reward ratio should be calculated before investing as the markets are volatile and an investor should be sure how much money is expected to be gained and what is the maximum loss that can be incurred. The predictable loss should always be less than the predictable profit. There must be a limit stop loss order in place that protects against loss to the minimum.

Should you trade forex?

Forex and CFDs are risky products and should be studied well before starting to trade.

Forex and CFDs are risky products and should be studied well before starting to trade. Forex market & the currency values depend on several economic factors. Trading CFDs, are risky instruments as they involve a leverage. The loss incurred may be more than the money invested. Hence, these products should be tracked and tested on demo before trading live.

The money invested in Forex & CFDs should be kept purely for trading purposes and the investor should be ready for both profit and loss of the entire capital. The traders in the financial markets lose money, as losing is one of the aspects of trading. Therefore, do not invest any money which you can’t afford to lose.