Many Nigerians especially the younger generation are increasingly embracing online forex trading despite the risks posed by an absence of domestic Nigerian government regulation.
According to data from Nigerian trading community website MyTradingLand, Nigeria will soon match South Africa in the number of young retail forex traders under age 30.
We will discuss everything you need to know about starting forex trading in Nigeria, as well as the risks that you may not be aware of.
Comparison of Forex Brokers in Nigeria
The regulation, minimum deposit, & spread are 3 important metrics to consider when shopping for a new forex broker in Nigeria.
The table below shows you how some of the best forex brokers in Nigeria fare when compared against each other based on these 3 metrics.
| 💼 Broker | ⚖ Regulator | 💰 Minimum deposit | ✂ Spread | 💱 Account currency |
|---|---|---|---|---|
| Exness | FCA UK, FSCA South Africa, CMA Kenya | $10 | $0.1 per 1,000 units traded | Naira, USD |
| HFM | FCA UK, FSCA South Africa, CMA Kenya | $5 | $0.14 per 1,000 units traded /td> | Naira, USD |
| Tickmill | FCA UK, FSCA South Africa | $100 | $0.01 per 1,000 units traded | USD |
| FxPro | FCA UK, FSCA South Africa | N30,000 | $0.15 per 1,000 units traded | USD |
| AvaTrade | FSCA South Africa, ASIC Australia, FSA Japan | $100 | $0.09 per 1,000 units traded | USD |
| XM Broker | FSCA South Africa, CySEC Cyprus | $5 | $0.06 per 1,000 units traded | USD, EUR, GBP |
How to Start Forex Trading in Nigeria
1. Get a Laptop & Mobile Phone with Internet
You need a laptop to trade forex because it has a bigger screen & you can analyze charts clearly. A mobile phone comes in handy as support so if you need to grab a coffee, you can monitor your trades on your phone
You also need a stable internet connection so you can remain connected to the market & attend to your trades promptly. Before you start trading for the day, you should reconfirm that you have sufficient data on your trading device
2. Register & Open an Account with a Regulated Forex Broker
The process of opening an account with a forex broker is similar to bank account opening in Nigeria. You can open an individual account, joint account, or corporate account.
Also read legal documents at the bottom of the broker’s website, to find out what rights you have & do not have when trading with the broker. Legal documents also tell you what the broker can do without your consent.
Documents/information for opening a forex account in Nigeria :
- BVN Number
- NIN number
- Passport photo
- NEPA/PHCN/Power bill/Water bill etc.( the most recent one of the last 3 months)
- CAC certificate (for corporate accounts)
To begin the account opening process, you will have to download the broker’s trading app, or open an account from the broker’s website. All documents listed above will be scanned and softcopy uploaded to the broker’s app or website.
3. Fund Your Trading Account
Minimum deposit in forex is the least amount of money you can deposit into your trading wallet
Always register with a forex broker whose minimum deposit you can afford. There is no point opening a forex account you cannot afford to fund
When you complete your registration/profile setup with a forex broker, they will open an online wallet for you. The wallet is not a trading account, it only warehouses your deposits. You must create a live trading account which is what you will use to trade
The fastest way to deposit into your wallet is by selecting “Local Bank Transfer” & copying out the Nigerian bank account that pops up; then you transfer the funds to that account using your mobile banking app.
However, not every broker will give you a Nigerian bank account number to transfer to, some brokers may ask you to insert your credit/debit card details, then send you an OTP to authenticate the transfer
Once the funds you deposited reflect in your wallet, you can then move them to your trading account & start trading.
4. Pick a currency pair(s) to trade
Some currency pairs attract lower spread (trading fees) while some attract higher spread. Beginners should avoid trading currency pairs with high spread because it will take a longer time for your trade to yield a profit.
Pairs like the EUR/USD, GBP/USD, USD/JPY, etc. are considered major pairs because they contain the USD on one side & the currency of another developed country on the other side. Major pairs have lower spreads & less uncertainty around them so they are ideal for beginners.
Some currency pairs like EUR/GBP are considered minor because they do not contain the US Dollar; & pairs like USD/ZAR are considered exotic because one of the pairs is that of an African country. Minor & exotic currency pairs attract higher spread.
For example when trading the EUR/USD major currency pair with Exness broker, you pay a spread of $0.1 per 1,000 units; but when you trade USD/ZAR exotic pair you a pay spread of about $19.44 per 1,000 units traded.
Another reason beginners should only trade major pairs is that some brokers like Exness & HFM allow you trade them without paying overnight fees. This means you can leave your trade open overnight at no cost.
5. Place your first trade
Before you place your first trade, you have to decide whether you want to start by buying & close by selling; or start by selling & close by buying. These are the two ways to trade & both ways can yield profit.
If you think the exchange rate of a currency pair will appreciate, then you start by buying so you can close by selling & making a profit. You basically buy low & sell high
If you think the exchange rate will fall, you should start by selling so you can close by buying. You basically sell high & buy low; & profit from the open/close price difference
Consider using risk management tools like Stop Loss that automatically closes your open position when pre-set conditions are crossed/met.
You also don’t want to allow greed to get hold of you as such, you may want to consider using a take-profit order.
A Take-Profit order is an order that tells the broker to close your open position once you have made a certain amount of profit.
Basic Forex Trading Strategies
1. Fundamental Analysis
Fundamental analysis involves analyzing economic, social, and political forces that can affect the price of a country’s currency.
This includes economic indicators like interest rate, inflation, unemployment rate, GDP, industrial production, etc.
For example, if the USA increases the Interest rate on dollar-denominated assets, those assets will become more attractive to both local and foreign investors.
To buy these dollar-denominated assets, foreign investors will have to sell their local currency to buy dollars, thereby increasing the demand for dollars. The overall effect of this will be an increase in the strength of the dollar to the detriment of other currencies.
Wars can attract sanctions to a country, causing its economy to suffer and its currency to depreciate. Political events such as electing politicians with new ideologies can also scare investors away, thus depreciating a currency.
Key indicators important to fundamental analysts are:
- Interest rates
- Inflation
- Deflation
- GDP growth rate
- Employment statistics
- Trade balance reports
- Political events
- Military conflicts
- Quantitative easing
2. Technical Analysis
Technical analysis involves speculating on the future movement of prices by studying past price movements.
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Technical analysts use charts to study price history, and price movements, and draw trend lines to connect two points & reveal hidden patterns in the charts.
Candlestick charts are the most popular charts used in technical analysis & they open a window into the past allowing you to see past price movements as far back as one month
Green candlesticks indicate rising prices & red candles indicate falling prices.
Technical analysts look for familiar patterns on the charts, that indicate a trend is about to change. For example head and shoulders pattern means a bullish trend maybe about to turn into a bearish one and vice versa.
A doji candlestick pattern also indicates neutrality meaning the market is indecisive as opening and closing prices are at par.
Technical analysts also use indicators to further confirm chart patterns and read market sentiment. Volatility indicators such as ATR, Bollinger Bands, & VIX tell you how unstable currency prices are at a given time.
Volume indicators like the Chaikin Money Flow, show how many buyers and seller are in the market at a given time. MetaTrader4 uses green bars to indicate that volume is on the rise and red for decrease.
Is Forex Trading Legal in Nigeria?
Forex trading is not illegal in Nigeria, but there is no local regulation in the country. Due to absence of regulation SEC has warned the general public that they trade forex at their own risk.
This is why you should trade with brokers who have top-tier oversea regulations. Top tier jurisdictions like the United Kingdom, Australia, and European Economic Area (EEA) have stiff forex regulations in place, and are considered Tier-1 regulators.
Offshore jurisdictions like Bahamas, Saint Vincent and the Grenadines, Mauritius, and other island nations are not known for stiff forex regulatory oversight.
Some offshore regulators let brokers supervise themselves which is not healthy so they are considered Tiers 2 & 3 regulators. However forex brokers still go ahead to register subsidiary companies in offshore jurisdictions because of tax breaks & other incentives.
For example a forex broker with a UK license can also open a subsidiary in the Bahamas and move register Nigerian traders under Bahamas laws (which are not as strict) instead of UK laws.
Always check where your account is registered under by reading the customer agreement under legal documents.
In summary a forex broker who holds a Tier 3 regulatory license, should also have a combination of Tier-1 or 2 license for additional safety and comfort.
Check the bottom of the brokers page, or the about information on the brokers website for information on names of regulators for a broker.
Also keep in mind that if you ever have any issues with your broker that result in a court case, the hearing will take place in the country where your account is registered.
When Should You Trade Forex in Nigeria?
The best time to trade forex in Nigeria is from 8AM to 5PM because this period signifies the London session. Note that Nigeria shares a similar time zone with London. The peak period where you get fastest market movement is between 1pm & 5pm because London & New York sessions intersect at this time
The worst time to trade forex in Nigeria is around 1am to 5am during the Asian session which will deprive you of sleep, and you will experience slow market movement/turnover because most of the world is also asleep during that time.
Also avoid trading forex on Monday mornings & Friday afternoons because these periods signify the start/close of a week; so prices may move erratically without following any pattern so your strategies may not work
Frequently Asked Questions
What is the minimum amount to start forex trading in Nigeria?
You can start trading forex in Nigeria with $5. Brokers like HFM will allow you deposit the naira equivalent of $5 into your wallet & you can then allocate these funds to trading. However, note that with $5 you cannot open big trades to make much profit.
Is forex trading good in Nigeria?
Forex trading in Nigeria is not illegal but it is risky because the Nigerian government does not offer support to traders. This implies that if you are scammed by a rogue broker, the government will not compensate you.
However, if you are trading with a reputable broker with strong oversea regulation you won’t be scammed. Forex trading in Nigeria actually works but you need constant practice & sufficient capital to become profitable because over 80% of traders lose money.
One of the reasons many traders lose money is because they are undercapitalized, so before their trade can become profitable, they run out of funds & are stopped out by the broker. Another reason is a lack of discipline & the desire to get rich quick from a few trades
What is Leverage in forex?
Leverage comes about when you lend funds from your broker to trade. It is represented in a ratio. A 1:50 leverage ratio means that for every 1 USD you deposit, you can open a trade worth 50 USD.
Another way of looking at leverage is you only need to deposit 1/30th of the total contract amount while your broker lends you the balance.
If contract sum is 5,000 USD and leverage is 1:50 you only need to put down 100 USD required margin of your own money, and your broker loans you the rest. However you repay the loan with interest.
When using leverage of say 1:50 your losses are multiplied x50. This makes it dangerous for inexperienced traders.
What is a pip in forex?
A Pip is the unit of measurement for the smallest movement an exchange rate can make which is usually 0.0001 or 1 pip. The zeroes are ignored and the last digit taken.
Consequently an exchange rate move from 1.0900 to 1.0912 means a 0.0012 difference or a 12 pip move.
In forex the value of 1 pip is $10, but this is when you’re trading 100,000 units of a major currency pair which contains the US Dollar on the right hand side (example EUR/USD, GBP/USD). This means that if the exchange rate of a major currency pair changes by as little as 0.0001, you will profit or lose $10 if you traded 100,000 units of it
Which is the best forex broker for forex trading in Nigeria?
HFM offers the best customer support & education for forex traders in Nigeria, making them the best forex broker for beginners. HFM MetaTrader is also easy to install so beginners can download & setup easily
FxPro is the best forex broker in Nigeria for experienced traders because they offer raw spread pricing & have advanced trading platforms. FxPro also accepts deposits of N30,000 & above from Nigerian banks
Exness is equally best forex broker for beginners especially those who don’t have laptops and want to trade on their mobile phone. Exness offers a practical mobile app for this. The downside of Exness is their customer support isn’t as good as that of HFM
How profitable is forex trading in Nigeria?
When trading forex, you’re competing against big institutional traders who have more information and capital than you do; & this is partly why over 80% of retail traders lose money.
Institutional traders can send in large orders that can alter the balance of the market & drive price up or down so you must take profits early & not be greedy.
You need to practice strategies for years to start being profitable and even at that you will still lose around 6 out of 10 trades. The technique is to ensure the sum of your wins is higher than the sum of your losses.
Your risk determines your reward so if you’re trading with small capital like $5 you cannot expect to make much profit so profitability depends on your capital & how disciplined you are when executing your strategies with risk management at the fore.
