Is It Possible to Trade Forex Safely in Nigeria?

In Nigeria, Forex trading is booming. Even before the pandemic, the country came second in terms of daily volumes. Now, its expert community is growing. Sadly, because of unscrupulous brokers, Forex is often misconstrued. In reality, it is possible to make money safely. Follow our tips to find a legit broker in the country.

Lack of Regulation

What allows scammers to thrive is the absence of a solid legal framework. Unlike South Africa, Nigeria is yet to see any coherent legislation for the industry. It does not mean all brokers are scammy, but individuals must exercise caution. It is crucial to choose a provider, which is licenced and authorised by reliable monitoring bodies. 

Overview of Available Services

Nigerians may register accounts with local or international brokers. Big global brands offer multiple advantages: first, they are authorised by credible organisations; secondly, they have cutting-edge software and around-the-clock support on weekdays. Finally, the range of free educational resources is stunning.

Licenced brokers provide negative balance protection. It means you will never lose more than your current balance. As many Forex instruments are traded on margin (i.e., with a portion of borrowed capital), this is invaluable. Otherwise, you may end up owing hundreds or thousands of dollars to the broker, depending on your results.

How to Choose a Broker

Licenced companies are open about their status. Usually, you can find full details on the official website. For example, Forextime is authorised by several credible organisations: the FCA in the United Kingdom, the FSCA in South Africa and the CySEC in Cyprus. Licencing must be your primary criteria.

Next, consider the company’s reputation. Search for expert reviews and customer feedback online. Today, plenty of websites are dedicated to comparison of Forex brokers and trading insights. Naturally, reviews from customers may be fake, so analyse them critically.

How to Develop a Safe Strategy

Risk is inherent in any form of online trading. The largest financial market is beyond anyone’s control. You may only monitor the forces driving it and examine price patterns to make informed predictions. There is no such thing as a perfectly safe strategy. Without risk management, your losses may get out of hand.

Well-established brokers like Forextime provide an abundance of educational resources. They publish overviews of popular strategies like scalping, day trading and swing trading. You may also find links to external sources like tutorials, books, YouTube videos, etc. 

Decide how much time you can spend trading. Some strategies require you to work throughout the day; others are more relaxed. For instance, swing traders feel comfortable with several positions per week, while scalpers dip in and out of the market frequently, with momentary trades lasting minutes or seconds. 

Keep a trading journal. Note down key characteristics of every position. These include the instrument, prices at entry and exit, motivation for the trade, liquidity and volatility. Review performance weekly to understand if your strategy is effective and your decisions are objective. 

Once you pick a style, you should stick to it religiously. If you deviate from the plan, it is hard to assess its efficiency. No strategy is faultless, as there are quite a few variables in the market. 

How to Choose a Currency Pair

Brokers offer dozens of combinations — Major, Minor, and Exotic. Currencies are always valued against one another. For instance, the rate for EUR/USD shows how many US dollars one euro is currently worth. 

Some pairs are more volatile than others, which means their prices change more dramatically in the short term. For traders, this translates into higher potential profits and higher risks. Exotics are notorious for their instability, as they represent emerging economies (e.g., USD/ZAR). 

Another parameter to consider is liquidity. You may buy and sell the most liquid currencies at any moment, as there is always a counterparty for your transaction. The computerised system executes trades without delay. In case of low liquidity, the exit price may differ from your expectations.

So, which combinations should you choose? Any pair may bring profit if you know how it moves. Pick currencies you understand best and monitor the respective economies. For instance, you could stick to Majors as the most stable pairings. If you choose highly volatile markets, have tougher risk control in place. Generally, risks must be limited to 1% of overall capital, whatever the asset is.

To Sum Up

Yes, it is possible to trade Forex in Nigeria safely. However, you must be cautious when choosing a reliable provider. Work through a licenced and well-established company with a positive reputation. Remember that choosing the best broker does not protect you from costly mistakes if you trade on a hunch or use a flawed strategy.