Forex trading is the buying or selling of currency on the international currency market.
Forex trading aims at extracting profits from the price movements of the currencies. Therefore, forex traders aim to make money from buying a currency at a low price or exchange rate and selling at a higher price. It involves two currencies while the trade is facilitated by a forex broker.
Traders often use margin trading to speculate on currencies, risk factors increase due to the involvement of leverage and margins which leads traders to risk even more than their invested amount.
Forex trading determines the exchange rates of all global currencies and is the largest financial market in the world with daily transactions of $6.6 trillion. Forex trading has high liquidity, operates 24-hours, has low transactions costs, easy to use platforms and has fast-paced regulations.
In the past foreign exchange market was limited to Banks, governments and large institutions, however, this has changed with retail traders and speculators increasing their participation due to the availability of low-cost trading platforms. Around 5.5 per cent volume of the global forex market consists of retail and speculative investors.
Forex trading in Kenya has increased over the years with Kenya accounting for 70,000 people participating in the trade.
The Capital Markets Authority ((CMA) of Kenya is the regulatory authority that monitors financial conduct in Kenya. Meaning that any forex broker in Kenya has to be authorized CMA to operate. CMA advises traders against using brokers that serve Kenyan markets and are not based in Kenya.
Kenyans can trade in the foreign exchange market through any retail CFD or forex broker in Kenya. Traders using CDF broker and retail forex do not own the asset or currency physically but only speculate on the price movements of currency pair through CFD instrument created by the broker. Which is the commonest way of online forex trading in Kenya.
The most famous and trusted brokers around the world are FCA of UK, NFA of the US, CySEC of Cyprus and ASIC of Australia, CMA of Kenya. If a broker is regulated by more than one of the top regulatory authority it’s a good sign of trust.