Forex trading is one of the most lucrative businesses in Nigeria. But not everyone that starts Forex trading makes money from the business and the reason is simple, not everyone understands the business.
This is why we have provided this guide to help you start your Forex trading business in Nigeria. But first, let’s take a look at what Forex trading is and how it works.
How to Start Forex Trading in Nigeria
The term Forex stands for Foreign Exchange and Forex trading simply means foreign exchange trading or trading on foreign currency by its exchange rate.
The history of Forex can be traced to 1875 when the gold standard monetary system was created. Many years later in July 1944, the Bretton Woods system led to the establishment of a system of fixed exchange rates with the U.S dollar replacing the gold standard to become a primary reserve currency; and the establishment of three international agencies to oversee economic activity. These include the International Monetary Fund (IMF), International Bank for Reconstruction and Development and the General Agreement on Tariffs and Trade (GATT).
Currently, the foreign exchange market is a decentralized market for the trading of currencies. This market determines the foreign exchange rate.
Forex trading involves buying, selling and exchanging currencies at current or determined prices. And the Forex market is known to be the largest market in the world, followed by the Credit market.
In general, Forex trading is defined as the business of buying and selling currencies of different countries online using internet trading platforms. The objective of Forex trading is to earn a profit from the fluctuations in these currencies.
Typically, the price of one of the currencies is linked to the price of the other currency in a trade, so you’re working with two currencies at a time. The first currency is known as the base currency while the other currency is known as the quote currency. The difference in price between the currencies is where you earn a profit.
The principle behind earning a profit in Forex trading is based on the economy of different countries which differs in relation to one another at any point in time. And the price of the currency is usually a direct reflection of the market’s opinion on the current and future health of its respective economy.
For example, if you’re buying the Japanese yen, you are basically buying a “share” in the Japanese economy and betting that the Japanese economy is doing well, and will even get better as time goes.
The Forex market is never fixed or stagnant at any point in time as well. The market is quite volatile and it is always changing and can’t be accurately predicted.
Now that you know what Forex trading is all about, let’s take a look at the steps to starting the process. Once you follow these steps, it shouldn’t be difficult succeeding as a Forex trader.
Find a regulated broker that has at least 5 years track record and open an account with the broker.
Once you have an active account you will be required to make a deposit to cover the costs of your trades. This is called a margin account.
You can start with a demo account for practice prior to starting active trading. You can open a demo account with any of the popular Forex trading platforms. These demo accounts are loaded with virtual money and you can carry out the trading in real time mode. The difference between demo trading and actual trading is that you don’t make any real profit or loss in demo trading.
With demo trading, consistent practice is important because practice makes perfect. Because you need to excel in the virtual trading before you attempt using your money for real trading.
Once you’re ready to start your Forex trading, the next step is to fund your Forex account. You can fund your account through direct deposit or by using your credit/debit cards. However, you will need to have a domiciliary account to start your Forex trading.
The domiciliary account is very important for an effective transaction and enables you to make a withdrawal of your profit when there is any. This account is generally used for cashing funds as well as depositing funds into your Forex trading account.
You can also use other currency media like the eCurrencies but it will still end up in your domiciliary account.
In Forex trading, you have several options of currency you can trade as a new trader but your best bet is to start with the major currencies. These are the most widely used currencies and we have highlighted them below.
SYMBOL / COUNTRY / CURRENCY / NICKNAME
USD / United States / Dollar / Buck
EUR / Eurozone / Euro / Fiber
JPY / Japan / Yen / Yen
GBP / Great Britain / Pound / Cable
CHF / Switzerland / Franc / Swissy
CAD / Canada / Dollar / Loonie
AUD / Australia / Dollar / Aussie
NZD / New Zealand / Dollar / Kiwi
The currency symbols always have three letters, where the first two letters identify the name of the country and the third letter identifies the name of that country’s currency. For instance, AU stands for Australia while D represents the dollar.
Additionally, there are also some of the requirements you should have prior to starting your Forex trade.
A fast and reliable internet connection is a necessity if you’re looking to trade Forex in Nigeria or anywhere else. If you don’t have excellent internet service, it might be difficult for you to monitor trends and make quick decisions and this could affect the profitability of your business.
A high performing laptop is another important prerequisite for any prospective Forex trader. In fact, many people make losses in Forex trading because of their inefficient trading device. So, you need to get a laptop that will enable you to access the market on the go.