Nigeria has a growing community of Forex traders. Over 200,000 local residents are estimated to trade currencies online. Now, when the economy is in tatters due to COVID-19, consumers are seeking alternative sources of income. The foreign exchange gives everyone a chance to make a profit. This global market is still vibrant and offers plenty of opportunities.
1. Lack of Regulation
Nigeria is yet to see any stringent regulation for the Forex industry. Scams are rampant, as there are no laws to fight them. Traders should be extra cautious in their search for a provider.
Residents may settle upon local and global sources of brokerage. Do not trust advertisements blindly. First, check that the company is authorized by a trusted industry organization. In the case of foreign brands, look for licenses from the FCA, the FCSA, the CySeC, etc.
Generally, international brands have an edge over homegrown companies. They serve millions of customers on different continents. Brokers offer a wealth of educational resources and allow their clients to learn for free. Finally, their support centres are always at your back and call.
2. Special Conditions for Traders From Nigeria
International brokers recognize the potential of the region. After all, Nigeria is the second largest contributor to Forex volume in Africa. Large companies tailor their services to satisfy local needs.
For example, Forextime offers a special type of account nominated in the Nigerian naira. This allows local traders to save on conversion fees that can erode profits. Entry to the market is also very affordable. 'Cent accounts' allow you to trade in the real market with just $10 on balance.
3. Forex Is Always Risky
The notion of a perfectly safe investment is fiction. It is merely a ploy used by scammers. The more you can potentially gain - the more you can lose. Huge profits are always accompanied by soaring risks. Any offers of high and easy earnings are signs of a hoax.
Indeed, people looking to invest safely may open a bank deposit. However, the interest rate is sure to disappoint. In the best-case scenario, you may cover the inflation rate.
Pay close attention to the so-called risk/reward ratio. Every trade should be evaluated based on rigorous criteria. Risk up to 1% of your capital on each position. It is also obligatory to use Stop Loss and Take Profit. These two features are embedded in any popular trading platform like fxtm webtrader allowing you to exit at desirable price levels.
When you choose instant execution, your order is filled automatically when the Stop Loss is triggered. Even if the market makes a turnaround, you can be sure your losses are limited.
4. Risks of Leverage
You cannot be too careful with leverage. Trading on margin is a double-edged tool: it can boost your profits, but also erase your deposit. The broker lends you a portion of their funds according to a special ratio. For instance, if it is 1:100, you need to deposit $100 to trade with $10,000. This sounds alluring, but it is definitely not for newbies.
5. Psychology of Trading
To trade profitably, you need the right mindset. Emotions are every trader's enemies. When we are sad or happy, we act irrationally. In financial markets, this leads to failure. For instance, think of the latest crisis triggered by the pandemic. When the stock markets collapsed, investors started to frantically sell their assets. Some of these stocks may recover in the near future and even reach new highs. Still, the initial reaction is motivated by fear.
Prerequisites for Success
Without fail, education is the cornerstone of trading. You need to understand how different methods of analysis work. Learn about the fundamental and technical factors and practice interpreting them in the demo mode. You do not have to choose just one system - traders may rely on both indicators and fundamentals to make decisions.
Forex is not for the risk-averse. You need a certain degree of bravery and confidence to play on the colossal market. Every day, close to $6 trillion circulates between institutions and individuals. In order to partake in this activity, you need a profound knowledge of the market, strong will, and an insatiable urge to learn. Mistakes will happen, and they should be used to improve your strategy.
