In Nigeria, Forex trading is skyrocketing because many people move to this market. It enables the Nigerian economy to develop. Therefore, many people ask whether it's easy to trade in Nigeria or not. So, let's consider all the particularities of Forex trading in Nigeria.
Forex trading involves speculating on the price hikes and drops of the currency fluctuation. The trading volume in this region reaches from ₦300 to ₦450 million a day. You can be interested in trading on the Forex market because it attracts a trader with a huge number of opportunities even for ultimate newbies. However, to enter this market successfully, you need to investigate the most popular terms and be aware of the most popular strategies and ways to determine the future behavior of the currency price. In this guide, you will get to know whether a Forex market is profitable for small individual investors. How much can you earn by trading different currency pairs?
What is Forex Trading
International currencies are exchanged to provide foreign trade and business. This can be processed at the foreign exchange market.
For instance, if you live in Nigeria and want to purchase wine in Italy, you need to pay the winery in Euro. To do this, you need to exchange the equivalent value of Nigerian Naira for Euros on a special foreign exchange point. If you are a private person and buy several bottles, you can exchange currency in a local bank. If you run a company and want to buy thousands of bottles, you or your bank go to the Forex market for Euros.
Forex trading can be risky and complex. Forex instruments are not standardized. In some countries and regions, Forex trading isn't regulated at all.
The interbank market consists of banks, financial organizations, and funds trading with each other worldwide.
How Does the Forex Market Work in Nigeria
There are the most beneficial periods for trading in every market. The Forex market is no exception. It's the best time to trade when the level of volume and liquidity increases.
The most effective time to trade in this region is between 2 pm and 10 pm. At this time, more traders are awake, and the activity level is the highest. If you are a Nigerian, you just end your working day at this time and trade after a hard-working day.
Advantages of Forex Trading in Nigeria
One of the main benefits of trading in Nigeria is that the Forex market isn't regulated in Nigeria although the current market is one the most active across the region.
If you are a Forex trader, you are not charged any commission. Any regulators don't control this market. Therefore, the supply and demand of currency traders affect the current price. The Forex market of Nigeria differs from its stock market, where local stocks can't drop or enhance beyond 10% of their present value for one day.
Low Transaction Costs
One of the main reasons to start Forex trading in Nigeria is low transaction costs. In the Forex market, currencies are traded directly by market participants, including banks, without intermediates. It means that participants are not charged fees involved while trading bonds, stocks, and ETFs.
Forex doesn't charge commissions on currency trades processed through currency trading platforms.
In addition, the essential benefits of the Forex market in Nigeria are high liquidity and excellent profit potential.
Disadvantages of Forex Trading in Nigeria
When it comes to the disadvantages, we need to mention a high-risk factor, social trading, and scammers. Let's consider them in detail.
Read more: Social Trading VS. Copy Trading
One of the main disadvantages of Forex trading in Nigeria is high leverage that can reach 1:1000 in certain cases. If you use high leverage, you risk losing everything at one moment. For instance, your leverage is equal to 1:1000. You can lose your entire investment if a small price movement is against your open position.
A lot of brokers in the Nigerian market are not transparent. They can use some Offshore regulations. If you want to learn how to trade Forex in Nigeria, you must avoid brokers who offer a get-rich-quick scheme. Pay attention to brokers regulated by government bodies.
A wide range of different factors, including political and economic, affect the volatility of currency pairs in the market, especially for non-conventional ones. Therefore, it's very important to monitor any news before opening and closing a trade. To reduce losses, don't forget to use stop-loss orders.
Forex trading can sometimes be highly emotionally exhausting. One bad trade can cause large losses that exhaust traders emotionally.
Successful Traders in Nigeria
Among the most successful traders, we can emphasize Uche Paragon, Ajidahun Afioluwa, Blessing Ezeako, Sandile Shezi, Patrick Ogagbor, and others.
Uche Paragon is one of the most popular traders in this region. He started his career from Binary Forex trading.
Ajidahun Afioluwa is another successful trader. When he started, he faced losses one by one. However, despite many losses, he continued learning Forex and growing through his failures. He investigated diverse strategies and designed his own one.
Blessing Ezeako started her career by exploring trading strategies. She learned the Forex trading process while having a full-time job.
Sandile Shezi is a South African trader who was born and grew up in a very poor family. Later, Sandile became the most successful trader among the youngest Nigerian traders. He bought and sold stocks and currency pairs without economic education and necessary background. This bright example demonstrates that everybody can become a successful trader from scratch.
Patrick Ogagbor is a trader who gave up his previous job at the bank. While being curious, he was searching for new ways to develop his skills. Initially, he thought that trading was a get-rich-quick business, but then he understood that it was much more.
Tips for Beginner Forex Traders in Nigeria
If you have decided to trade on the Forex market in Nigeria, you don't need any special skills to start. To protect your capital from huge losses, the first and the most important rule is to set stop losses and take profits.
Besides using stop losses, you need to develop your winning formula. Initially, you can follow other more experienced traders. However, later, you can create your strategy to get success.
How Much Does It Cost to Start Forex Trading in Nigeria
If you start trading with JustMarkets, you can start trading on the Standard Cent account. The minimum amount to start is $1. On the Standard account, you also need to deposit at least $1. However, if you choose a Pro account, a minimal deposit is $100.
Important Forex Trading Terms in Nigeria
There are several terms that every trader in Nigeria needs to know, including a currency pair, leverage, a bid/ask price, margin, pip, lot size, and much more. Let's consider several of them.
What is a Pip in Forex
A pip means "percentage in point." Using pips and points, a trader can measure price movements on the market. While a point is the smallest movement in the currency price, the pip is equal to 10 points.
Using margin, you can make a small deposit into your account to increase the value of your trade. It enables a trader to open a larger position size. If you trade with margin, you need to invest only a percentage of the full deposit. Margin allows increasing the value of your trade. When you win some amount, the margin increases the volume of your win. However, if you lose, the sum of your losses also increases.
How to Trade the Forex Market in Nigeria
If you don't know how to do Forex trading in Nigeria, we have prepared a step-by-step guideline for you:
- You need to choose a reputable Forex broker. Not all brokers are reliable due to the decentralized market without strict regulation.
- Start trading on a demo account to enhance your trading skills first. Then, a trader can start practicing on a live account.
- Deposit into your account.
- Install your trading platform. JustMarkets offers customers two reliable trading platforms, including MetaTrader 4 and MetaTrader 5.
Learn the Different Forex Trading Strategies
Here are several of the most popular strategies that Forex traders in Nigeria need to know. Among them, there are positional, swing, and day trading.
Positional trading is a form of long-term trend trading. In this strategy, traders are waiting for significant movements in the price. The basis of the fundamental analysis and the knowledge of the currency's structure will help you trade on Forex using this strategy.
Swing trading is a strategy focused on reaching smaller gains in short-term trends. If you are a swing trader, traders can bring small but regular profits. Swing trades are open for a few days to a couple of weeks.
Day trading is a popular strategy among a huge number of Forex traders. It focuses on opening and closing trades during one day. Day traders can't last trades open overnight.
The Asset: Currency Pairs for Nigeria
There are three of the most popular currency pairs to trade in Nigeria. The EUR/USD currency pair is the most popular pair in the Forex market, including the currencies of the world's two largest economies. A high level of liquidity makes this pair less volatile than other pairs. However, under certain conditions, this currency pair can become more volatile.
The Japanese yen (JPY) is now widely held as a reserve currency behind the USD, Euro, and the GBP. The Japanese yen has a high level of volatility, but the Bank of Japan often purchases and sells large amounts of the currency to manage the level of volatility.
The Japanese Government pays attention to keeping the yen low to maintain a competitive export market. If you are a holder of US dollars, you are able to get high-level profits due to these daily fluctuations by purchasing at the right time.
The values of these currencies are closely related. When it comes to the correlation, commodity prices impact the Canadian dollar.
For instance, volatility in oil prices can significantly impact the value of the CAD because the economy of this country depends on crude oil exports. In 2016, oil prices dropped to their lowest level during one decade. The CAD also dropped to 1.46 CAD against 1 USD at that time.
Trade size: Lots, Mini lots, Micro lots, and Nano lots
A Standard Lot is equal to 100,000 units of any currency. Mini Lot is 0.1 lot and is equal to 10,000 units of any currency. Micro Lot is 0.01 lot and is equal to 1,000 units of any currency. Nano lot is 0.001 lot and is equal to 100 units of any currency.
Leverage: Amplifying Exposure but Increasing Risk
High Risk with LeverageA lot of Forex brokers offer a high degree of leverage. It's equal to 1:1000 in many cases. With leverage service, you can place a $1,000 order in the market while having just $1. However, you need to understand that you can lose as much as you win. For instance, while using 1:1000 leverage, you deposit $100 into your account to place one standard lot buy trade on EUR/USD. If the price moves ten pips against, you will become bankrupt. Professional traders advise you to apply proper risk management and never risk more than five percent of the balance of your account.
Risk of VolatilityThere are a lot of factors that cause a high level of volatility. Traders can't control these factors. Therefore, it's very important to monitor news before opening or closing a trade. In addition, you should use stop-loss limits.
Avoid Unreliable BrokersThere is a huge number of unreliable Forex brokers that lack transparency. It's better to avoid brokerage companies offering get-rich-quick schemes. You should pay attention to brokers regulated by FCA, CySec, etc., with a high level of experience, positive reviews, and a high level of transparency.
Emotional StressForex trading is an extremely emotional business. Each trade can cause huge losses. Therefore, a trader needs to be stress-resistant.
What is a Forex Trading Platform
A trading platform is used by a trader to make orders. There are several of the most popular trading platforms among traders, including MetaTrader 4 and MetaTrader 5.
MetaTrader is free software released in 2005. Traders all over the world think that this is the best platform for trading Forex despite the release of more modern software.
MetaTrader 4 is a platform enabling you to earn on the Forex market with an intuitive and user-friendly interface. Applying this trading platform, you can maintain, monitor, and manage your trading account. It offers its users indicators, expert advisers, and other tools to analyze the market in real time. At this platform, users are able to develop their own trading instruments and share them with other traders.
This is the latest version of the MetaTrader 4 platform, offering more opportunities to the traders than the previous one. It's more intuitive and comfortable. While using MetaTrader 5, you can use copy trading, mobile trading, and other innovative features that allow managing your account more effectively.
Is Forex Trading Legal in Nigeria
Forex trading in Nigeria is badly researched but it’s not forbidden overall. The Government of the state doesn't forbid trading stocks, so this makes trading acceptable.
Fundamental analysis is a way to predict the future price movement according to political and economic events. This type of analysis explores anything that impacts a currency price, starting from the industrial conditions and ending with worldwide political events.
One more type of analysis used by traders to determine a price movement is technical analysis. This is a disciple intended to evaluate investments and identify opportunities. Among the most popular indicators are candlesticks, helping to determine the future behaviour of the currency price.
If you want to start trading Forex in Nigeria, you need to start trading on the demo account before practicing on the live account. It provides you with all the necessary experience and helps make proper decisions in the future. You need to explore the benefits of all the most popular trading strategies, including positional, swing, and day trading. While starting trading, you need to determine your risk limit not to become bankrupt.
There are a huge number of successful traders in Nigeria who started their careers from scratch and are bright examples that everybody can become a trader. Trading can cause emotional stress. So, you need to be ready to manage your emotions and stay cold-minded. In addition, this market is very volatile. To protect your assets, you need to use stop losses.
The best trading platforms to join Forex trading in Nigeria are MetaTrader 4 and MetaTrader 5, offering an intuitive interface. The best currency pairs in Nigeria include EUR/USD, USD/JPY, and USD/CAD.