Trading foreign currencies over the internet is quickly becoming one of the most common ways for people in Africa, particularly younger people, to put their money to work.
It has a minimal entry fee, is accessible at any time of day or night, and can be accessed through mobile devices as well as desktop and laptop computers. In this article we explore the best way to trade Forex in Nigeria?
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1. Open an account with a regulated broker
Forex trading scams and unregulated brokers are a big problem for novice traders. Anyone claiming to be a “Forex expert” on social media should be avoided.
In order to verify the legitimacy of a broker, you merely need to click a few times on the bottom of their website to access the relevant government agency’s website. You should also look for regulated brokers that offer the best naira trading accounts.
Negative balance protection is another benefit of dealing with a registered broker, as you will never be able to lose more money than you have in your account.
2. Make use of a demo account
Demo accounts are available from almost every broker, and their functionality is identical to that of actual trading accounts, with the exception that the funds in demo accounts are virtual. The vast majority of reputable brokers provide a practice account that never closes.
If you have access to an unlimited demo account, you will be able to put your skills to the test and put what you have learned into practice without having to worry about losing any money.
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3. Make use of low leverage at first
When you begin trading with a live account, it is imperative that you are conscious of the leverage that you are employing.
Some forex brokers in Nigeria will provide leverage of 1:1000 or even 1:2000, and while it may seem like a good idea to multiply your trading capital by 1000 or 2000, the effect of leverage also applies to compounding any losses that you make.
It is recommended that you begin with a maximum leverage of 1:100 until you become comfortable with the influence that leverage has on your trading.
4. Focus on the majors
All of the following currency pairs involving the US Dollar are considered to be “major” Forex pairs: EUR/USD, USD/JPY, GBP/USD, and USD/CHF. These are the most actively traded currency pairs in the world. These two things have a tendency to be the most stable together.
The majority of brokers will also provide “minor” currency pairs and “exotic” currency pairs, such as the Euro and the Turkish Lira (EUR/TRY) or the Australian Dollar and the Mexican Peso (AUD/MXN).
These exotic currency pairs have a higher standard deviation of price action, which means that your trading costs will be higher than with majors.
5. Make use of algorithmic trading software
Copy-trading brokers give inexperienced traders the opportunity to “copy” the trades of more seasoned investors in exchange for a small commission deducted from the profits of the copied trades.
Because the majority of copy-trading brokers will provide a breakdown of each experienced broker’s success rate, risk profile, and maximum single loss, novice traders are able to copy a trader who best meets their needs.