Is Forex Trading Legal in Kenya?

How to choose the right Forex Broker in Kenya

👉 For novice traders entering the market, selecting a forex broker is the first and most crucial step. There are several factors to consider when choosing a broker, including picking one with low spreads, a range of markets to trade, a demo account, and educational materials for traders.

👉 Forex brokers are not a one-size-fits-all, and Kenyans can check the components below to find the right forex broker suited to their unique trading needs and objectives.

Consider the Broker Type

➡️ Market Makers or Dealing Desk – Instead of hedging their clients’ holdings with liquidity providers, market makers assume the risk themselves. This implies that a client’s loss is the broker’s gain and vice versa.

➡️ Straight Through Processing (STP) indicates that orders (trades) are performed without human intervention from the broker. It is in the broker’s best interest for customers to profit since they will trade more and remain clients for longer.

➡️ Direct Market Access (DMA) is comparable to STP. The primary distinction is that STP brokers may directly fulfil orders and hedge them with liquidity providers. DMA, on the other hand, involves sending orders directly to the market and filling them depending on the price obtained from the liquidity provider.

➡️ Electronic Communications Network (ECN) brokers automatically match buy and sell orders over an Electronic Communication Network.

Regulation

👉 The most crucial consideration for a potential trader is if the broker is licensed in Kenya. The Capital Markets Authority (CMA) is tasked with licensing and regulating forex brokers in Kenya.

👉 There are now six regulated non-dealing FX brokers in Kenya including FXPesa, HF Markets, Scope Markets, Pepperstone, Exinity, and Windsor Markets.

👉 The CMA recommends that traders and investors only do business with these licensed brokers. It advises that trading with unlicensed brokers is dangerous.

👉 The risks associated with dealing with unregistered brokers include fraud, theft of confidential information, and, in the worst-case scenario, money theft.

👉 Apart from CMA, if you use a broker that is not regulated in Kenya, check the broker’s licensing in each jurisdiction in which it operates.

👉 In the United Kingdom, this is the Financial Conduct Authority (FCA), in Australia it is the Australian Securities and Investments Commission (ASIC), in New Zealand it is the Financial Markets Authority (FMA), and in Singapore, it is the Monetary Authority of Singapore (MAS).

Customer Support

👉 A platform outage, price problem, inaccurate account statement, or other technical issues might arise with any service.

👉 Although no broker is completely safe from this risk, a trader should rest easier knowing that their broker can be reached easily, will be held responsible, and will swiftly and fairly handle any difficulties that arise.

👉 The broker’s ability to help in your native tongue is another something to consider.

Trading Platform and Tools

👉 MetaTrader 4 (MT4) and MetaTrader 5 (MT5) are popular trading platforms, and many brokers provide either, or both, to their customers.

👉 In addition, traders must check additional tools offered, including, but not limited to:

➡️ An app that enables users to “copy” the trades of successful traders.

➡️ Software for automated technical analysis, such as AutoChartist.

➡️ PsyQuation and other tools for market research, intelligence, and sentiment analysis.

Education

👉 Many brokers now provide resources and training to assist their customers to improve their trading abilities. Online education could take many forms, from individual blog articles and courses to full-fledged online academies and collaborations with subject-matter experts.

👉 Trading seminars, both in-person and online, are a common technique to assist newcomers to learn the ropes and develop their skills.

Risk Management Features

👉 Traders may practice making trades on a simulated platform with virtual funds by signing up for a free demo account, which is often provided by brokers.

👉 While demo accounts typically have a short lifespan (usually one month), customers who transition to a genuine account are sometimes offered the option to keep the demo account active permanently.

👉 Also, it is important to make sure the broker allows for all order types that may be used to mitigate risk. To reduce trading risk, a stop-loss order and take-profit target should be in place.

Execution Speed and Slippage

👉 Execution speed is crucial for most traders since it allows for more precise pricing in a dynamic market. But it is crucial for traders that engage in high-volume trading to use scalping tactics or Expert Advisors.

👉 In such situations, even microseconds of lag time between transactions might result in monetary loss. One thing to keep in mind is that the execution speed in a demo account may not be the same as in a real-money trading account while testing a broker’s service.

👉 When a trade order is filled at a different price than was offered, this is known as slippage. Brokers cannot completely eradicate slippage, but it is more noticeable during high-risk market events when liquidity is low.

👉 Therefore, Kenyan traders must be alert to the possibility of slippage and ready to act appropriately.

Range of Markets

👉 An excellent broker will provide a wide selection of trading items. A trader’s knowledge of the options accessible to them is useful even if their primary concentration is on currency pairs.

👉 It would be disappointing if, for example, a trader saw a trading opportunity in oil, cryptocurrency, or the stock market but could not take advantage of it because their broker did not provide access to those markets.

Trading Fees

👉 Most of a broker’s income used to come from commissions and fees, but as we enter a new age, many brokers are doing away with those sources of income to stay competitive. 

👉 Because not all brokers have yet achieved the point of zero costs, you should be aware that each one has its own set of fees.

👉 Fees like commission should also be included. Traders may open an account with a variety of brokers, each of which offers a unique set of features and services for a price.

👉 You might find that some accounts have a bigger spread but no commission, while others have lower spreads but a commission fee. It is set up that way so that each trader may choose the account type that is most suited to their trading style and budget.

👉 Swaps are another factor that should not be ignored by those who initiate and maintain currency trades overnight.

👉 Depending on the currency pair and the direction of the trade (long or short), the costs associated with this sort of transaction, known as a swap rate, may be either positive or negative.

Leverage and Margin

👉 The maximum level of leverage allowed is standardized in certain countries and is not up to negotiation between brokers. When there are no regulations concerning leverage, the level of leverage may be adjusted to meet the needs of the customer.

👉 Kenyans must remember that the risk increases as leverage increases, regardless of the amount chosen.

Fund Management

👉 One of the benefits of having a trading account is the ability to deposit and withdraw cash via a variety of methods. In most cases, credit card deposits are the most convenient, fast, and secure method; however, certain brokers may provide regionally specific alternatives.

👉 Over the last few years, more deposit and withdrawal methods have been accessible, and cryptocurrency is among them.

Trading Accounts

👉 Multiple account types are often made available by brokers to accommodate a wide variety of trading styles and approaches. Most people will choose a “Standard” account, which is optimized for convenience and includes all the tools that active traders need.

👉 There are other accounts aimed at professionals, which may have different pricing or more features, for those who want to trade on a more serious level.

👉 In addition, there are more specialized types of accounts, such as the VIP account for high-volume or high-net-worth traders or the ‘Swap-Free’ account for Islamic traders who are prohibited from receiving interest payments due to their faith.

Overall Reputation of the Broker

👉 Trying out a broker is sometimes the only way to see whether they are the best fit. The options may be narrowed down with some preliminary investigation.

👉 You can quickly form an opinion on whether to work with a certain broker by consulting sources such as customer reviews, trading forum threads, press announcements, awards, and publicly available financial data.