Forex trading used to be a bank-only activity, with banks making millions of dollars just by exchanging the currencies of other countries. However, thanks to the internet, you can now trade Forex from the comfort of your own home with as little as $100 in start-up money. While it is feasible to begin Forex trading with $100, it is not recommended for profit purposes. In this article, I’ll try to clear up some of the problems surrounding Forex trading for beginners in Nigeria.
Is Forex trading still profitable for the average person? How much money can you make as a part-time or full-time Forex trader? What are the risks that you should be aware of when trading forex? Is it possible for an average person to establish a Forex trading business with only a basic understanding of the money market and financial management? All of these questions, as well as others, will be addressed in this post.
For beginners to forex trading, it can be challenging. This is due to the fact that beginners in the market have unrealistic expectations. Many of the essential ideas are the same whether we’re talking about forex trading or share trading for beginners. We’ll concentrate on Forex trading in this article. However, when it comes to share trading, some of the same strategies, terminologies, and broad notions apply.
By the conclusion of it, you’ll be familiar with all of the most important terminologies used in Forex trading, ensuring that you don’t get lost when learning to trade. You’ll learn everything from the ground up, including which platform to use, how to execute a trade, Forex trading tips for beginners looking to make money, and methods.
What exactly is forex?
Foreign exchange, or forex, refers to the process of converting one currency into another.
The foreign exchange market is a global market where banks, institutions, tourists, and investors trade and speculate on national currencies.
What is the foreign exchange market?
With an estimated average global daily turnover of more than US$6.6 trillion — up from $5.1 trillion just a few years ago — the forex market is by far the largest and most liquid financial market in the world.
Banks, corporations, financial organizations, hedge funds, and retail traders use the forex market to purchase and sell currencies 24 hours a day, five days a week.
The lack of a central marketplace or exchange in a central location is a key element of the forex market, as all trading is done electronically across computer networks. An over-the-counter (OTC) market is what this is called.
Is Forex Trading Profitable In Nigeria?
Yes, many people in Nigeria have profited from forex trading. These are, nevertheless, highly-skilled forex traders who are well-versed in the markets. While forex trading has the potential to be extremely profitable, it is not a get-rich-quick program. Many people in Nigeria have made a lot of money through forex trading, but many more have lost money.
However, if you take the time to master the foundations of forex trading correctly, you can make a fortune from it because forex trading can be a lucrative endeavor for anyone with the right abilities and resources.
Many people who lose money in forex trading in Nigeria do so because they either don’t know enough about the fundamentals or have the wrong mentality (Lottery mentality). Some of them believe that trading forex is a simple way to gain money with little risk. That isn’t how it works.
To trade forex profitably, you’ll need to devote time and effort to mastering the necessary abilities. Learn the fundamentals. There are numerous materials available, such as ebooks, YouTube, and even online/offline classes. Then you’ll need to practice trading with a demo account (a fake money account) and create your trading methods. You can open a live account and start trading with your money once you’re confident that these strategies work. You’ll also require a large sum of money to open trades that aren’t too leveraged.
How much money do I need to start forex trading in Nigeria?
To begin trading, several Forex Brokers do not require any kind of deposit. Instead, some of the companies offer a $20 incentive to try trading on their platform – the $20 is usually only good for practice and cannot be used to trade.
Because of the high currency exchange rates in Nigeria, you’ll need around $100 to get started with serious forex trading. Brokers normally recommend investing around $200 to get a leg up on the competition.
In Nigeria, when is the best time to trade forex?
Every market has peaks and valleys. The Forex market is no different since trading when there is a lot of volume and liquidity is the optimum time to trade.
This normally occurs between 1 pm and 11 p.m. in Nigerian time, which corresponds to the time difference between London and New York. More people are up at this hour, and the market is bustling with activity. And, as a Nigerian, you can trade during these hours after going home from work.
Forex Trading Terminology for Beginners
Here’s where you can start with your Forex trading notes for beginners. Before we start with forex trading for beginners, it is important to know some of the most important terminologies you’ll encounter in trading.
For new Forex traders, this is a must-know term. The capital offered by a Forex broker to boost the volume of trades its customers can make is known as leverage.
To manage a $100,000 position, for example, your broker will set aside $1,000 from your account. Your leverage, measured in terms of ratios, is now 100:1.
With $1,000, you now have control of $100,000.
Let’s assume your $100,000 investment grows to $101,000, or $1,000.
Your return would be a meager 1% ($1,000 gain / $100,000 initial investment) if you had to come up with the entire $100,000 cash alone.
This is referred to as 1:1 leverage.
Of course, I believe that 1:1 leverage is a misnomer because where is the leverage in having to come up with the entire amount you’re trying to control?
You’re not leveraged 1:1, but you are leveraged 100:1.
Your return is a delightful 100 percent ($1,000 gain / $1,000 initial investment) because the broker only had to put away $1,000 of your money.
We’d want you to undertake a little exercise now. Calculate how much you’d get back if you lost $1,000.
You would have gotten a -1 percent return using 1:1 leverage and a WTF! -100 percent return using 100:1 leverage if you computed it the same way we did, which is also known as the correct way.
As a result, whether we’re talking about trading for beginners or experts, leverage should be handled with prudence. If your account balance falls below 0 dollars, you can request your broker’s negative balance policy. This protection is provided by ESMA-regulated brokers. You will not be in debt to the broker if you use this protection because your balance will never fall below zero euros.
2. Who is a Broker in Forex Trading?
A broker is a financial intermediary who connects transaction counterparties without being a party to the transaction.
A broker is a person or corporation who executes orders to purchase and sell currencies on behalf of its clients in the forex market.
They function as middlemen between banks, linking buyers and sellers in exchange for a fee paid by the initiator or both parties.
Brokers are commission-based agents, not principals operating on their own account.
A statistic that shows how a stock’s price moves in relation to the market as a whole. When the market moves one point, a stock with a beta of 1.5 moves 1.5 points and vice versa.
4. Bear Market
When the stock market is in a downward trend, this is a term used to characterize it. To put it another way, when stock values are declining. It’s considered particularly bearish when a stock’s price declines sharply and rapidly.
5. Bull Market
Bull market is basically the opposite of bear market. A Bull Market occurs when the stock market has a period of increasing stock prices.
“Percentage in point” or “price interest point” is what Pip stands for. According to the forex market convention, a pip is the smallest price change that an exchange rate can make. The pip change is the last (fourth) decimal point in most currency pairs that are priced to four decimal places. As a result, a pip is equal to 1/100 of 1%. For example, if the bid price for the EUR/USD pair moves from 1.16667 to 1.16677, it reflects a 1 pip difference.
Spread is the difference between a currency pair’s buy and sale prices. The spread on the most popular currency pairs is frequently modest, sometimes as low as a pip! The spread tends to be substantially bigger for pairs that don’t trade as frequently. The value of the currency pair must exceed the spread before a Forex deal becomes lucrative.
“Contract for Difference” is the abbreviation for CFD.” It is a contract that is used to depict the price movement of financial products. In terms of Forex, this means that instead of purchasing and selling significant sums of money, you can profit from price fluctuations without owning the item. CFDs are also offered in equities, indices, bonds, commodities, and cryptocurrencies, in addition to Forex. They allow you to trade the price movements of these items without having to buy them in any case.
If you want to learn more about CFDs, we recommend reading this article here.
To create and maintain a new position in forex trading, you just need to put up a little amount of money.
The “margin” is the name given to this amount of money.
For example, if you wish to buy $100,000 worth of USD/JPY, you don’t have to put up the entire amount; only a fraction of it, say $3,000, is required. Your forex broker or CFD provider will determine the exact amount.
Margin is a type of good faith deposit or collateral that is required to begin and maintain a trade.
It’s a “good faith” guarantee that you’ll be able to keep the trade open until it’s closed.
Margin is not a fee or a cost of doing business.
Margin is just a portion of your account balance that your forex broker sets aside to keep your transaction open and assure that you can cover the trade’s possible loss.
The margin is typically expressed as a percentage of the total position value. Most forex brokers, for example, state that they require a margin of 2%, 1%,.5%, or.25 percent.
10. Spot FX
This type of Forex trading is buying and selling actual money. For example, you can buy a particular number of pounds sterling and convert it to euros, and then after the value of the pound grows, you can exchange your euros for pounds again, gaining more money compared to what you originally spent on the purchase.
11. Ask and Bid
A forex trader’s bid price is the price at which he or she is willing to sell a currency pair. The ask price is the price at which a trader will purchase a currency pair. Both of these prices are displayed in real-time and are updated on a regular basis. For example, the bid price for the British pound versus the US dollar is 1.3528, which is the price at which a trader wants to sell the GBPUSD. If a seller believes a currency will fall in value, he or she may sell at the offered price to profit from the drop. The ask price for the British pound against the US dollar is 1.3548. This is the price a trader wants to pay to buy the currency pair.
This is where transactions happen. The NASDAQ and the New York Stock Exchange are two well-known stock exchanges (NYSE).
When an exchange closes and trade ceases, this is the time. The NASDAQ and NYSE have regular trading hours of 9 a.m. to 4:30 p.m. Eastern time.
Also check: All you need to know about NFTs
How to be a successful Forex trader in Nigeria
For newbies, Forex Trading can get very complicating and confusing. Forex trading in reality, is not so. As it has been shown that it can be a very simple activity, provided you follow the instructions required for success carefully.
It doesn’t matter what job you’re in be it a gateman, motorbike rider, driver, or something else. This is so because Forex Trading can be learned in one day, one week, or even one month depending on your capability and schedule. All that is needed are just a laptop or a smartphone and a stable internet connection.
Step 1: Opening a Forex Trading account
Just as clearly stated above, a broker is a third party who provides a forex trading account and also acts as a liaison between you, a newbie trader, and the market. To illustrate, think of your forex trading account as a bank account in a savings package. You can save money and also withdraw the money without hassle anytime you like. Similarly, your forex account serves the same purpose. You can actually keep or deposit funds into your forex account to begin trading. After trading in the forex market, you can withdraw your funds especially when you make a successful trade.
Make sure you open a forex account with a reliable broker. One thing to look out for when searching for a broker is that a credible forex broker would have a clear office address, a license from an authorized government agency stating its operations. I personally use OctaFX and I recommend it to you.
After getting a broker, the next thing to do is go to the forex broker’s website. Look for an icon or a link that states ‘Open A Free Account’ or ‘Open A Demo Account’ or ‘Register A Forex Trading Account’. After clicking the link, fill in your details in the next part that appears. Get your details ready such as Full Name, Address of Residence, Active Email Address, Phone Number. It is a fast process and doesn’t take a long time if you fill in your current details. The next step is verification. This can be done by uploading a photo or scanned copy of your passport or via SIM SMS. In some cases, you’ll be required to upload a scanned copy of your water bill or electricity bill as proof of your address of residence.
Step 2: Downloading the online Forex Trading platform
After opening your account successfully, you’ll be sent a link to download the trading application. After you download the application then fill in your login with your password and username.
Step 3: Simulation in a demo account
After concluding step 1 and step 2, it is essential you start trading using a Demo Account. A Demo Account is an account for practice using virtual funds to try out your trading ability without suffering loss or profit. The aim of a demo account is for practicing.
Step 4: Depositing funds into a Forex Trading account
After ‘playing’ in your demo account for a while, you might feel that you’re ready to start real trading. In order to start this process, you will need to deposit the funds into your account.
You can deposit any amount you want depending on the minimum amount required by the broker. In order to check the minimum amount required to deposit, you might need to read the withdrawal rules in the Member Area. Various methods of depositing are allowed such as credit cards, bank transfers, and many other options.
As a newbie in the game of trading, you are advised not to deposit a huge amount of money in case you experience loss in the market. If in any way you have problems depositing funds, you can reach out to your broker to assist you.
Step 5: Starting Forex Trading in your real account
After the funds you sent to your account have been confirmed by your broker, you can now begin your journey into Forex Trading. The funds you deposit into your account will be reflected in the Member Area of the trading platform.
Prior to all these, you will be needed to open a real account in the Member Area section of the platform to confirm that you’re no more a new trader. This means that the server connected to your account will be different, although other features will remain the same.
Step 6: Withdrawing from your Forex Account
One of the reasons why I personally use and recommend OctaFX is because it is easy to withdraw your funds. You can withdraw to your bank or cryptocurrency wallet with no fees or commission whatsoever and it takes 1-3 hours to approve the withdrawal and up to 1 hour to transfer the funds.
Note: You can trade on currency pairs such as EURUSD, GBPUSD, USDJPY just to mention a few. If you want to trade on a currency pair, you have to drag and drop the currency pair over a dark background area on the chart. It will eventually appear there.
If the currency pair strengthens in the market the chart will go up. In order to predict which currency pair will strengthen, you can make technical and fundamental analyses on the market.
To place an order on the chart, click on Buy or Sell then click on the New Order icon. After the order that been sent, the full details of the transaction will appear on the screen and then later be transferred to Trade History. You do not need to buy and sell origins anyhow but you need to carefully plan an order. Learn hack of successful trading such as the trading technique, significance of candles, profit, and risk target proportions.
Also check: Making Money Online: 5 mistakes to avoid as a beginner
Best brokers for Forex Trading in Nigeria
According to Forextrading.ng, these are the 8 Best Regulated Forex brokers in Nigeria for 2022
- FXTM – Best Forex Broker in Nigeria
- Hotforex – Best Regulated forex broker
- OctaFX – Best Low spread forex broker with commission-free local deposits & withdrawals
- XM – Forex Broker with Fast Order Execution
- Exness – Low Minimum deposit & spread as low as 0 pips
- Avatrade – Fixed Spread Forex Broker in Nigeria
- Alpari – Good ECN broker in Nigeria
- IC Markets – True ECN Broker
Forex trading strategies
Traders use the following forex trading methods to provide structure to their trading activities. These methods aren’t built specifically for forex markets; rather, they’re broad strategies that can be used in any financial market. The type of trader you are will influence the strategy you use.
Forex scalping strategy
Scalping is preferred by forex traders who favor short-term trades lasting only a few minutes or who want to capture several price moves. Scalping forex focuses on accumulating modest but regular profits while also attempting to limit losses. These short-term traders might only entail a few pips in price fluctuation, but when combined with enormous leverage, a trader can still lose a lot of money.
This forex technique is best suited to people who can devote their time to higher-volume trading periods and maintain a laser-like focus on these quick deals. The following are examples of high-volume trading periods:
The New York and London stock exchanges are open from 8 a.m. to 12 p.m. GMT.
The Tokyo and Sydney exchanges are open from 7 p.m. to 2 a.m. GMT.
Between 3 a.m. and 4 a.m. GMT, both the Tokyo and London stock exchanges are open.
The most liquid FX currency pairs are frequently chosen because they have the tightest spreads, allowing traders to quickly enter and exit positions. Here are a few examples:
The minimal spread on the AUD/USD currency pair is 0.7 points.
EUR/USD has a minimum spread of 0.7 points.
The minimum spread on USD/JPY is 0.7 points.
Day trading on the forex market
Day trading is an alternate forex trading method if you wish to trade for short periods of time but aren’t comfortable with the fast-paced nature of scalping. This usually entails only one deal per day that isn’t carried out overnight. Any intraday price fluctuations in the relevant currency pair result in profit or loss.
This form of trading would necessitate plenty of time to research and monitor the deal, as well as a thorough understanding of how the economy may impact the currency pair you’re trading. It’s possible that big economic news will be released on that day, which will have an impact on your position.
Swing trading on the forex market
Swing trading, which tries to profit from price movements by detecting the ‘swing highs’ or ‘swing lows’ in a trend, is for traders who favor a mid-term trading approach where positions can be held for several days.
Although this method allows you to spend less time focusing on the market than day trading, it can put you at risk of overnight interruptions or gapping.
Position trading on the forex market
Most patient traders might prefer forex position trading, which is less concerned with short-term market volatility and more concerned with the long term. Forex position traders will maintain positions for weeks, months, or even years. The goal of this technique is to see the value of the currency pair increase over time.
Forex position trading is better suited to people who are unable to devote hours to trade each day but have a thorough understanding of market fundamentals.
For more and advanced forex trading strategies, kindly download this e-book
Tips that will help beginners succeed as Forex Traders in Nigeria
1. Choose the Right Broker
Before you ever consider trading, you must consider the best broker or platform from which you would trade. While they are all designed to assist you in trading, some platforms provide you with trading capabilities as well as reasonable transaction rates.
Of course, you should think about the safety and authenticity of the platforms you use to trade on. Because there are so many brokers to choose from, you should think about your selections carefully. Read internet reviews and only trade with reputable brokers to ensure that your money is protected.
2. Keep up to date
What’s great about forex trading is that, because it’s based on foreign exchange, the rates you’ll be dealing with are influenced by current economic news. Good foreign investments, for example, can boost the value of one currency, whilst bad economic news has the reverse impact.
This means that keeping up with the latest news on the currencies you trade will be advantageous. Keep in mind that no currency is so volatile that it will experience a significant decline in value within 24 hours. Even so, economic news has a long-term impact on a currency.
3. Make a risk management strategy
Your profits in forex trading, like other financial instruments, are determined by the risks you are ready to take. The higher the stakes, the more money you’ll make. That does not, however, imply that you should trade recklessly until you run out of money.
Always trade with a risk management strategy in mind. When you hit a particular level of loss, you should typically quit trading. This will keep you from losing all of your money, and you’ll be able to come back another day if one trading session isn’t working out.
4. Start Small
Given that this is your first experience trading forex, it is wise, to begin with short, affordable transactions. This involves starting with a tiny amount of money from the beginning. Try to get a feel for the market before developing your own trading strategy. Try to be patient with forex trading because it is here to stay.
Trading one at a time is also a part of starting small. Experienced traders participate in several trades at once since they’ve earned the necessary skill set through persistent trading. You’ll eventually learn to engage in a variety of trades as well.
5. Come up with your own strategy
Many strategies can be found online, however, they are only useful at the beginning of your journey. Because we all have various ideas and budgets to stick to, each trader has his or her own effective trading approach. As time goes on, you should begin to develop a strategy that works for you.
Having your own strategy is advantageous because it is tailored to your experience as a trader. Aside from the budget, this also takes into account your trading abilities. As a result, if you are new to forex trading, it is highly recommended that you practice and take it slowly.
6. Practice with demo account
It should go without saying that practice is an important element of your forex trading journey. The good news is that there are numerous methods to train without putting yourself at risk. Demo accounts on trading platforms that allow you to trade with virtual money are a good way to start.
This unique function is available on almost every trading platform, so you won’t have to seek hard to discover one. Make it a requirement to trade with a demo account before trading with real money. Get a sense of what it’s like to trade FX.
7. Stay away from being overly emotional
Finally, regardless of what you’re looking to exchange, you’ll hear the most prevalent tip. It’s not a good idea to trade with your emotions. This forces you to take needless risks, potentially putting your entire financial portfolio at risk. Maintain as much neutrality as feasible.
What does it mean to be overly emotional? This essentially means that you allow your emotions to influence your trading decisions. For example, if you’re having a good run, being emotional implies continually increasing the number of trades you make because you’re overconfident. It’s not necessary for us to explain why this is a horrible idea.
For persons with a financial background, the foreign exchange market has emerged as a lucrative possibility. Anyone with a laptop or smartphone can potentially make significant profits in the forex markets, thanks to simple entry requirements and markets that are open 24 hours a day, seven days a week. However, those chances come with a lot of risks and a lot of leverage. To win in forex, anyone wanting their money will need tight discipline and skill.
This is an online forex trading guide for novices in Nigeria. Whether you’re looking for novice Forex trading tips in Nigeria or overseas, the information in this article is relevant to you. All of the phrases and concepts we discussed in this post can be applicable to traders all around the world because of the ability to trade online.