Everything To Know About Forex Trading in Nigeria

Nigeria is Africa’s most populous nation and has one of the continent’s most prominent and fastest-growing economies. Despite forex trading’s infancy in Nigeria, it has quickly gained popularity. For Nigerian investors, forex trading is a potential source of earning money. Forex trading entails speculating on the value of currencies to generate a profit. Forex is exchanged in currency pairs, in which one currency is matched against another. Buying one currency means selling another.

Take the currency pair NGN/USD in forex as an example. The “Base Currency” here is NGN (Nigerian Naira), and the “Quote Currency” is USD. The “base currency” value indicates how many “quote currency” units are needed to obtain one “base currency” unit. If you believe the NGN will rise in value soon, you might speculate on this by purchasing NGN/USD, which entails selling dollars while buying Nigerian Naira.

If the NGN appreciates against the USD in the future, you can enjoy your profit by selling the NGN/USD pair.

What contributes to the rise of forex trading in Nigeria?

Around 3-5 billion Naira is exchanged daily in retail forex in Nigeria, which is expected to expand significantly quicker in the future. Others have speculated that this is due to factors such as the declining cost of internet access, the proliferation of mobile devices, the development of global payment systems in Africa, and the increasing number of young people in these regions who view forex and cryptocurrencies as promising opportunities for financial gain.

The emergence of many major brokerages in Nigeria has also helped educate young people about investing. Because of this, there has been a dramatic increase in the popularity of trading contracts for differences (CFDs) on the forex market and the worldwide equities markets.

Forex trading regulations in Nigeria

The Central Bank of Nigeria (CBN) is the government agency overseeing the country’s banking system and financial policy. The Securities and Exchange Commission (SEC) of Nigeria and the Central Bank of Nigeria (CBN) work together to provide a regulatory environment for forex trading in Nigeria. Despite this, the currency market operates with little to no regulatory oversight. The burden of determining the reliability of a broker is firmly on the trader. While this may increase the danger for those with little expertise in forex trading to fall prey to fraudsters, Nigerian investors have a wide variety of reputable brokers from which to choose. Choose a broker like Oanda with a strong international presence that’s authorised to do business in many countries. Forex trading profits are subject to taxation in Nigeria and must be reported.

Get started with forex in Nigeria

If you’re considering trading in the global forex market, there are several important steps you need to take to ensure your success:

1. Although forex trading can be done on any online device, it’s highly recommended that you primarily trade from a home office equipped with multiple screens. This will enable you to efficiently process the vast information necessary for making informed investments. In addition, you must ensure that your internet connection is strong and has minimal latency to prevent delays.
2. Not all brokers are thoroughly vetted because the forex market lacks significant regulation and is decentralised. Thus, conducting thorough research and practice with virtual accounts is crucial to ensure the safety of your investments and integrity before settling on a broker.
3. After selecting a broker, follow their account opening process, which usually entails identity verification and linking your bank account.
4. You’ll need to deposit funds into your Forex account before you can start trading. This can be accomplished through a third-party bank, check, or debit/credit card.
5. Some brokers offer proprietary trading platforms, while others integrate with third-party providers. Regardless, you’ll need to download the trading software, which serves as your interface for making investments in the market.
6. Forex trading requires hard work and dedication, but with the right approach, it can be profitable. Remember to stay disciplined, informed, and patient with your investments.

Forex trading strategies in Nigeria

Successful foreign exchange traders employ various different strategies. There are many kinds of analyses, but the vast majority may be grouped into two broad classes: technical and fundamental.

Technical analysis includes analysing chart patterns, currency movements, and technical indicators like the RSI, MACD, Bollinger Band, and divergences, among others, before placing an order based on examining these aspects. In contrast, the focus of fundamental analysis is on making trades in response to changes in the economic outlook for a currency, as revealed by news events such as gross domestic product, unemployment figures, and the balance of trade, capital outflows.

You’ll also need a broad understanding of tactics to decode the logic behind positional shifts made over a few minutes or hours.

Scalping

This rapid trading method is designed to make little profit on each trade. Scalpers often only stay in a transaction for a few seconds before exiting. Timing is essential in scalping. Therefore familiarity with indicators, a lightning-fast trading platform, and a latency-free internet connection are all necessities. Instead of focusing on the fundamentals driving the long-term movement of currency pairings, this technique emphasises understanding how charts change.

Day trading

The goal of a forex day trader is to make a profit after the trading day through a series of intraday deals. Overnight swings are something that day traders would rather not see. As currency trading occurs around the clock, this is less of a problem. Traders can still operate on the weekend with this method. Day trading might encompass the full trading session or only a few seconds.

Swing trading

Swing trading targets short-term price fluctuations. These roles can, but need not, be held across several days. Understanding the underlying macroeconomics of a currency pair might be helpful for swing traders. A swing trade’s possible period is longer than that of a scalp or day trade, making it more susceptible to the impact of news items and macroeconomic variables.

Positional trading

Also referred to as long-term trend trading. These traders watch for significant changes in a currency pair’s price. This strategy may suit you if you are a patient trader who isn’t concerned with minute fluctuations on the chart. You should be well-versed in the basics of forex trading and the underlying currency structure you wish to trade.

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