How much Money do You Need to Trade Forex in Kenya

Trading Costs that Kenyans must Consider

👉 In contrast to other exchange-driven markets, the forex market has a unique characteristic many market makers employ to attract traders.

👉 They guarantee there will be no exchange fees, regulatory costs, data fees, or commissions. Unfortunately, this seems too good to be true for a newcomer trader attempting to enter the forex market.

👉 Trading without transaction expenses is advantageous. However, what unskilled traders perceive as a bargain may not be the greatest value available or even a deal.

👉 Therefore, Kenyan Forex traders must be aware of several trading and non-trading fees and understand their significance to succeed. Here is a summary of the daily trading expenses you could incur on the Forex market.

Minimum Deposit

👉 Not all Forex brokers need the same minimum deposit. Thus, some are more popular than others. However, brokers with higher minimum deposit requirements tend to have lower leverage ratios since traders need more cash to begin trading.

👉 In contrast, brokers with minimal capital requirements let traders employ bigger leverage ratios, enabling them to build larger positions and incurring lower margin needs.

👉 A few forex brokers let clients begin trading without making a minimum initial deposit. These brokers provide no-deposit bonuses, welcome bonuses, and sign-up bonuses.

👉 With these incentives, traders open a real trading account, verify the account, and get trading credit after registering. This trading credit may be used similarly to a minimal deposit, allowing traders to engage in trading operations without initially investing funds.

👉 However, since this money is not real, it cannot be removed from the account. Therefore, traders must trade with capital to withdraw cash from the account and generate a profit.

Forex Spreads

👉 Regarding Forex trading costs, the spread is likely the most well-known expense associated with making a deal. Spreads in forex trading may be either variable or fixed. A variable or floating spread is a value between the ask and bid prices that fluctuates continuously.

👉 In other words, the spread you incur when buying a currency pair changes according to factors such as supply and demand and overall trading volume. Typically, brokers that guarantee narrow spreads provide flexible spreads.

👉 Although it is feasible for the actual spread you pay to match the broker’s quoted spread, this is not always the case. Spreads are often narrower during busy trading sessions with good liquidity. The London-New York overlap shows this.

👉 Fixed spreads, on the other hand, are not subject to change depending on the state of the market; rather, they are predetermined by the broker and do not respond to changes in volatility.

👉 Although variable spreads advertised at 0.1 pip seem more attractive, stable spreads could save you more money over your trading journey.

Service Levels of the Broker

👉 When deciding on the most beneficial broker for their accounts, Kenyan traders must evaluate several variables since no two brokers are identical. The reason why not all brokers can build a market equally is straightforward.

👉 Banks are the principal market makers, which implies that they facilitate the buying and selling currencies. Moreover, these banks collaborate closely with other banks and several pricing aggregators, who are brokers.

👉 These ties are decided by each brokerage firm’s size and general creditworthiness. Because the forex market is decentralized, there are no guarantors or exchanges. Hence, there is just a credit arrangement between market players.

👉 Regarding an online market maker, for instance, a broker’s effectiveness will be measured by their connection with banks and the total amount of transactions conducted with them.

👉 Therefore, brokers with greater trading volumes will get tighter spread quotes from these liquidity providers earlier.

👉 The brokerage firm may pass on the average bid and ask prices to its retail clients if its market maker has strong connections with many banks and can combine, for instance, the price quotes of 12 banks.

👉 Even after widening the spread to account for profit, the dealer can offer you a more favourable spread than less well-capitalized competitors.

👉 It is recommended that you check this out if you are collaborating with a broker that claims to be able to provide assured liquidity at competitive spreads.

👉 You could, however, elect to pay a fixed pip spread if you are certain that you will always achieve at-the-money executions. Slippage is a cost to avoid since it occurs when a transaction is completed at a price other than the one indicated.

👉 Whether you should pay a commission broker, a nominal fee depends on the broker’s other services. In exchange for a little cost, you could get something more, such as access to a proprietary software platform that is superior to most online brokers.

Broker Fees and Commission Charges

👉 In addition to spreads, your broker may impose additional trading expenses in different commissions and fees.

👉 Typically, trading commissions are expressed as a fee per traded side or traded lot. “Per traded side” refers to whether you are buying or selling a currency pair. In contrast, “round-trip” refers to establishing and closing a transaction.

👉 As its name indicates, “per traded lot” is a fee paid for each traded lot or 100,000 units of the base currency, dependent on your trading volume. Popular among brokers that promote trading accounts with zero spreads are per-trade commissions.

👉 Therefore, while there are no spreads to pay, the trading fees negate the spread savings.

👉 Checking your broker’s website under the “Trading Costs” section (if one exists) or contacting the broker directly through e-mail or live chat is the most reliable method for determining if your broker charges trading commissions or fees.

👉 Some of these commissions and fees could be concealed, so you might not know about them until you begin trading with the broker.

Slippage

👉 Slippage is not comparable to spreads, commissions, and fees. Slippage is more subtle, and if your broker is trustworthy and well-regulated, they will not benefit from slippage.

👉 Slippage is the difference between the price shown on the screen before initiating a transaction and the price at which the deal was performed. This is because when you click the “trade” button, you only place a market order with your broker.

👉 Your broker will attempt to obtain the best available market price, but this does not necessarily correspond to the price you believed you traded at. The most prevalent source of slippage is a disparity in the number of buyers and sellers.

👉 Simply put, the current exchange rate for every currency pair indicates the most recent exchange rate at which a transaction occurred, i.e., when a buyer and seller agreed to swap currencies at a specified exchange rate.

👉 The Foreign Exchange (Forex) Market is the most active market in the world regarding the volume of transactions. Thus, many buyers and sellers always compete for any given price.

👉 However, this equilibrium is occasionally disrupted by unforeseen market circumstances, such as the publication of unexpected market reports, political and social unrest, and natural disasters.

👉 The time of day you want to trade might also influence slippage. For example, the overlap between London and New York is the market’s most active period.

👉 During this trading day, slippage is often minor unless unexpected market news occurs. If you wish to limit the danger of slippage while making a transaction, you should do so during the market’s liquid hours.

Overnight Fees

👉 Rollover costs are also prevalent in the Forex market, particularly if you hold your transactions for more than a day.

👉 This fee is assessed since the rates reported for an FX pair are usually for its spot market, typically for settlement on T+2 days (in two days from the point of the quote).

👉 If you want to advance this by one day by keeping the deal open overnight, then you have advanced this settlement date by one day. You are charged a fee to reflect that you altered the trade’s basis. Rollover fees vary depending on the currency pair being traded.

👉 As you undoubtedly already know, central banks throughout the globe impose interest rates on holding their respective native currencies.

Financing Fees

👉 When trading on the Forex market, financing expenses are sometimes coupled with the rollover fee and are another key cost to consider. Due to the market’s considerable liquidity, currency pairings tend to move within tight bands on the Forex.

👉 Therefore, Forex brokers provide an exceedingly high leverage, allowing traders to benefit from even little price fluctuations.

👉 While most brokers provide leverage of 1:5, it is common for Forex brokers to offer up to 1:500 leverage. With this level of leverage, Kenyan traders might hold a position 500 times the size of their trading account. Nonetheless, it comes at a price.

👉 Brokers impose financing fees as yearly interest rates, which are taken from the current market rate plus a little markup.

👉 Daily financing charges are incurred on the notional position. Even though these expenses are often minor, they may readily escalate as your overall position size grows.

Deposit and Withdrawal Fees

👉 When trading on the Forex market, deposit and withdrawal fees are also significant charges to consider. Most brokers will impose a deposit/withdrawal fee when you deposit funds to or withdraw cash from your trading account.

Inactivity Fees

👉 The “inactivity fee” is a cost many brokers still charge their customers. For example, your broker may charge you an inactivity fee if your trading volume falls below a specified level, such as 10 deals in three months. Inactivity fees are more prevalent with stockbrokers than with CFD and Forex brokers.

Currency Conversion Fees

👉 Foreign exchange transactions conducted in a currency other than the account’s base currency might incur a currency conversion fee.

👉 Most brokers’ default option is immediate conversion, in which foreign-currency profits are translated to the base currency, and financing or commission fees are deducted before crediting your account.

👉 In addition, most brokers also provide options for daily, weekly, and monthly conversions.