Never before have so many Nigerians been trading stocks, forex, and other assets using online traders. A combination of increased financial stability in the region and more accessible trading technology has resulted in a booming industry.
There are many benefits to a growing trading market and most of them are connected to the traders themselves, such as a better understanding of global economies and potentially more money on their bank accounts.
However, trading and investments are also associated with risks and the better prepared you are before you get started, the easier it will be to avoid or minimize those risks.
Below, you’ll find the five most important and basic tips that you should consider before you register an account with a broker and start trading.
Find A Safe and Regulated Broker
The most important things to always consider when trading is safety and there is really only one way to make sure you stay safe. There are currently countless online brokers available all over the world but, unfortunately, many of them are scams and deceitful brokers whose only goal is to steal from and trick traders.
Luckily, there is an easy solution to avoiding these operators. You see, there are strict rules and laws that regulate every trading market, which we’ll get into shortly. However, there are also regulatory bodies which oversee the market and whose goal it is to protect traders.
In turn, these regulatory bodies issue trading licenses to brokers that live up to their high standards, and as long as you stick to licensed and regulated brokers, you’ll also stay safe.
Now, certain regulatory bodies are considered more serious than others, for example, the FCA in the UK and the FCSA in South Africa, and several brokers with a license from them are available in Nigeria. The easiest way to check which brokers you can trust is in this comprehensive list of Nigerian Stock and Forex Brokers.
Educate Yourself with Free Resources
Besides only using regulated services, one can limit some of the risks associated with trading through education. Financial markets are complex and intricate and it takes both time and dedication to master all the skills to finally become a profitable trader. In fact, education is key to making progress in the world of investments and online trading.
Fortunately, the Internet is the biggest resource of great and oftentimes free trading information and resources, and you should use this as much as possible.
For example, all of the regulated brokers mentioned in the section above provides their own educational material that can help you get started. Secondly, there are countless blogs and websites full of free content where you can learn everything from how to analyze assets to why certain markets are better suited for day trading than others.
Naturally, there are even more resources that aren’t free but just as useful such as investment books, and it’s advisable to use them as well whenever it’s possible.
Get Used to Mobile Trading
One thing that sets online trading in Nigeria apart from online trading in other regions, is that most traders use their mobile devices to trade instead of desktop computers and laptops. This means that Nigerian traders should focus on learning how to effectively trade on a smartphone which, in many ways, differ a lot from regular desktop trading.
Once again, the brokers listed in the linked post above all provide excellent mobile trading software, and it’s up to you to figure out which one you suits you better.
Only a few years ago, mobile trading platforms were extremely limited and basic, but lately, the mobile trading market has exploded. Subsequently, having a smartphone is today more than enough to start trading and investing efficiently.
Understand the Regulation
While relying on regulated brokers is the best way to limit the risks of trading online, it’s also important that you have an understanding of the underlying regulation in Nigeria.
For example, if you’re looking to start trading forex online, you should first study the Central Bank of Nigeria’s (CBN) forex exchange act, and we suggest that you look into the laws that apply to all regulated brokers in Nigeria.
In turn, learning more about how different markets around the world operate will give you an advantage compared to most other traders.
Information about trading regulation in Nigeria can be found in many places, and it’s suggested that traders start by visiting the regulatory bodies’ websites.
Start Small And Avoid Unnecessary Risk
Last but definitely not least, beginners have to start small scale and slowly. This is by far the best way to limit the risks associated with trading and something everyone has to do.
This tip involves only depositing small amounts to your trading account and never place more than 5% of your available fund on each position. Another great tip is to use the demo accounts offered by all regulated brokers since those accounts give you a chance to trade under real market conditions, but without any risk. Just keep in mind that you can’t make a real profit using a demo account since you’re using virtual funds.
To sum this article up, Nigerian traders and investors need to do the following:
- Use safe and regulated brokers with proper licenses.
- Educate themselves on everything related to financial markets and trading.
- Start small and stay calm – as soon as you lose your cool, you’ll start making bad decisions, thus limiting your ability to make a profit.