This article will tell you all you need to know about Forex Trading in Nigeria. It contains the basics of Forex trading.
A good friend of mine, who by the way, happens to be Forex trader regularly says, “Forex is a way to Financial Freedom”.
However, I found it very hard to believe until I saw how much he makes daily, from trading the Foreign Exchange Market.
To cut the long story short, My guy was making the minimum wage of a Nigerian in just a day. He didn’t even step out of his house or even his room. He sits down all day and makes his cool cash.
Surely, those figures are enticing. But, before you think of trading the Forex market, you have to learn it first. A successful FX trader says “LEARN, remove the “L” then EARN“. You mist follow the process.
So, I will be explaining the basics of Forex to you. That is, what you need to know as a beginner. Although, this article will not tell you everything, so you can do well to sought for more knowledge later.
- 1 Introduction to Forex Trading in Nigeria
- 1.1 Differences between Betting and Forex Trading in Nigeria
- 1.2 What is Forex?
- 1.3 What is traded?
- 1.4 Who can trade the Forex Market?
- 1.5 When can I trade the Forex Market?
- 1.6 Terminologies used in Forex Trading
- 1.7 Forex Brokers in Nigeria
- 1.8 Forms of Trading in Nigeria
- 1.9 How to trade the Forex Market in Nigeria
- 1.10 More Articles For You
- 1.11 Related
Introduction to Forex Trading in Nigeria
An individual who has not idea about Forex trading will call it a form of “betting”. I laugh when I hear people day this. There is arguably more to Forex.
Before, we even go deep, let me take you through the differences between betting and Forex Trading in Nigeria.
Differences between Betting and Forex Trading in Nigeria
1. Unlike betting, where you pay for odds, stake your money and input the games you bought, in Forex, you don’t stake your money. Instead, you use your money to buy/sell a currency.
2. In the same vein, anybody can begin to bet without having any prior knowledge, but in Forex, you must have adequate knowledge for you to trade.
3. Also, you don’t need any paperwork or means of identification to open a betting account, but in Forex, you need a lot of it to open a live account.
What is Forex?
Simply put, Forex means ” FOReign EXchange”. It is a non physical market where buying and selling takes place.
It is not a market like Aba, Oyingbo, or Oshodi, where we buy and sell clothes, shoes and the likes. The Forex market does not have any physical location. It spreads round the whole world.
In addition, the Forex Market is the largest Financial Market in the world, with a total daily liquidity of over 5 trillion dollars, compared to the meagre 22.4 billion dollars of the New York Stock Exchange.
Oops! I forgot. You might want to know what liquidity means. Well, Liquidity means the total amount of buying and selling volume happening at any given time.
You therefore might want to know the items we trade in the Forex Market. I’ll tell you all, just stay glued.
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What is traded?
Yes! Everyone wants to hear this. What the heck is being traded on the Foreign Exchange Market? A number of instruments are traded but the most traded is the currency.
A currency is bought/sold, while another one is simultaneously sold/bought. Simply put, if I buy currency A, then I have to sell currency B, at the same time. As simple as that
Who can trade the Forex Market?
A lot of people can trade the Forex Market, ranging from big companies, Banks, to individuals (retail traders) like you and I.
But, the banks are the one that dominate the Forex Market, and they make a lot from it. That is why they won’t let you learn how to trade it. Let me show you a domestic example of Forex trading that has happened to you.
You come to Nigeria, from the United States, and you have $100 dollars with you. You branch at a commercial bank to exchange the money to Nigerian Naira(NGN).
On getting there, you are told $1 equals N360. Then you exchange. What you have done is you have bought the Nigerian Naira, and you have sold the US dollar. So you will have (360×100)N36,000.
Then you decide to go back to the states the next day, with your N36,000. You branch at the same bank, and exchange the Naira for dollar again. They’ll tell you $1 now equals N380. So you have to pay more of the naira with you to get a dollar.
What the bank did is that, they bought the dollar at a cheaper price, and sold it back to you at an higher price. That’s Forex. They’ve made their gain already.
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When can I trade the Forex Market?
The Forex market is open 24 hours, 5 days a week. Then market us only closed during the weekends(Saturday and Sunday).
Terminologies used in Forex Trading
1. Price: I mentioned this first because all we do in Forex centres around it. The price is the base of any financial market.
Price refers to the rate of a currency to another currency. Simply put, how much of currency B will make currency A.
Let’s make use of the US dollar(USD)and Nigerian Naira(NGN). 1 USD equals 360 NGN.
2. Quote: Like I mentioned earlier, in the Forex Market, you buy currency A and sell currency B. Currency A and B are quoted in pairs in this format(A/B). Using our dollar naira example, we have USD/NGN. The price is now written in front.
This is called a quote. The first currency is called the base currency, while the second is called the quote currency.
3. Bulls: Buyers in the Forex Market are referred to as the BULLS.
4. Bears: Sellers in the Forex market are referred to as the BEARS.
5. A Bullish market: when the price of a quote us rising.
6. A Bearish Market: when the price of a quote is depreciating.
7. Go long: means to buy.
8. Go short: means to sell.
9. Pip; A pip serves as a unit for calculating profits and losses in the Forex Market.
10. Leverage: To trade the Forex market, you need a lot money, but the introduction of leverage has made everything easy.
With as low as $10, you can place a trade of $1million, making use of leverage.
11. Take Profit: You cannot sit in front of your system all day watching your trade. You can easily take your profit at a particular market price.
For example, I buy a currency pair at 1.5. I might decide to set my TP at 2.0, so as soon as the price hits the 2.0 mark, it automatically takes your profit and close your trade for you. You don’t even need to switch on your data connection.
12. Stop Loss: Recall I said Forex, is a way to financial freedom, it is also a way to bankruptcy. You can lose your capital, worth 5 years of hard labour, in just a minute. Yes, 1 minute!
This was why the stop loss order was introduced. It is a form of market order that allows your broker close your trade for you, at a particular price, in case the market goes against you.
Forex Brokers in Nigeria
Initially in Forex, only the big men who earned million of dollars were allowed to trade the Forex Market. They were called Men of Wall street.
But, with the proliferation of brokers, this has been solved. Brokers act as an intermediary between you and the Forex Market. They offer traders leverage to occupy a large trade position with a very small capital.
There are a lot of Forex brokers like Hantec markets, FXTM, XM, Metaquotes. alpari etc.
In addition, these brokers have offered traders the opportunity to practice trading with a demo account. The demo account allows you to practice the Forex Trading without depositing any capital.
You don’t need any document to open a demo account, but you will need a few things to open a live account, and begin your own Forex trading in Nigeria.
To open a live Forex account, you must:
- Have a national ID card
- Be at least 18 years of age
- Have a constant source of income
- Have a capital
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Forms of Trading in Nigeria
There are two forms of trading the Forex market. They include:
1. Fundamental Analysis: it is a form of trading with financial news. For example, if you get a news that there is more employment rate in the US, it means the economy will rise and therefore the US dollar will rise.
2. Technical Analysis: is the process of using technical instruments to determine future prices. You use instruments like candlestick, indicators, ichimoku, moving averages, etc.
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How to trade the Forex Market in Nigeria
Let me give you a brief explanation of how you will buy or sell currency pairs in the Forex market. Just follow this procedure;
1: Determine if the price of a currency pair will rise or fall. If it will rise, you will buy it, but if it will fall, you will sell it. Take note of this.
2: Enter the type of market order(For example; execution, limit and stop order).
3: Subsequently, Input the price you are buying or selling.
4: Input the figures of your Take profit and stop loss.
5: Lastly, Place your order.
In conclusion, you are advised to take your time in learning and studying Forex trading in Nigeria. The truth is you can’t learn the market in a day. It takes a lot of time and experience.
If you really wish to learn more about Forex Trading in Nigeria, I will recommended you visit babypips to gather enough knowledge.
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