Online Trading has been growing rapidly since the start of 2000. This has been made possible by the improvements in technologies behind the trading & investing ecosystem. Most exchanges, capital markets and commodities markets have gone online through the use of centralized electronic systems.
Many low-cost new brokerages have opened in the past decade to offer low cost services with fast execution with the help of online trading tools & technologies like Bloomberg Terminal, Refinitiv Electronic Trading, MetaTrader, cTrader, web trader & mobile apps; large liquidity providers like Citi, UBS, Barclays etc. have made it easier to get liquidity for any instrument from Stocks, indices, Forex to Cryptocurrencies by these brokerages.
Online Trading has got a lot of attention from younger population namely millennials who are savvy about investing and trading. Millennials today believe taking things in their own hand by educating themselves of the trading basics and investing online.
Trading in Bitcoin & Forex has seen a lot of demand and they have become very popular in Kenya, Rest of Africa & also around the world – such that FX is highly regulated & Cryptos trading is being considered by governments around the world for legalization.
While stock trading is also seen picking up among millennials globally with the availability of global stocks, IPOs through online trading apps like: FXPesa, Etoro, Plus500, Hotforex, XM, IG as these new investors are keen on investing in new age tech stocks like Amazon, Apple, Google, Facebook.
We look at the basic steps you would need to get started with online trading in Kenya.
1) Research the Available Instruments & Investment/Trading Options
The first step of online trading involves research and analysis of the financial trading instruments and investment options that are available for online traders in Kenya.
While most of the investment instruments including mutual funds, indices, commodities like oil, precious metals like gold, stocks, forex/currency trading, cryptocurrencies are now available online; you need to check which one suits your long-term goals including returns and experience level before investing in them. You must also assess your risk level involved in trading of that instrument before investing in it.
Like Mutual Funds is most suited for beginner investors and requires lower experience & involves least risk when compared to other investments.
On the other hand, Stocks, Indices, Commodities, Forex, Cryptos require extensive market research & understanding of market terminology and knowledge of tools required in trading & analysis.
Emmanuel of Trade Forex Kenya explains: “The financial instruments depend on various complex factors including economic, political, supply, demand etc. which result in their price movements. You should be able to research, and make an informed, educated decision on the instrument that you want to trade.”
“There are a variety of instruments that are available in the market which can follow different trends at any time. Like for example: Stocks of a particular sector generally show similar price movements, while currencies of emerging economies follow US Dollar trends like: weakening or strengthening against USD based on the strength or weakness of the Dollar.”
Education & experience is extremely vital to your success & making an informed decision in the online trading environment. Trading in the financial markets are subject to risks. You should also be able to understand the risks and mitigate them before investing.
2) Choose an Online Broker Suited to Your Requirements
You cannot directly trade in the financial markets including capital markets, forex market, commodities market or derivatives market. The buying and selling of instruments in the financial markets are executed through a middleman called a broker.
Individuals in Kenya need to open an account on a registered and well-regulated broker to take part in online trading activity. There are different regulations for different financial markets, your broker must have the required license to provide the access to the particular markets.
Like for example – for stock trading, the broker needs to be licensed by NSE. While for forex & CFD trading, brokers need to be licensed by CMA to offer forex trading & CFDs on Commodities, Foreign Shares. Few such CMA licensed brokers that offer Forex Trading and CFDs on Foreign Shares, Commodities are FXPesa, Scope Markets, PepperStone Kenya.
There are multiple brokers in the market that can be regulated to offer same instruments. You need to compare multiple factors like their fees, number of instruments on offer, deposit/withdrawal options, history & reputation in the industry, number of regulators the broker has license from etc.
You have to choose a broker that suits your trading needs at lowest cost and also ensure that the broker is highly regulated.
3) Open an Online Trading Account
After choosing a broker, the next step is to open a suitable account. There are different types of accounts that are offered by brokers depending on the needs, requirements and types of the traders.
For example – ECN accounts are offered by forex brokers to offer direct market execution of your currency and commodity trades at lowest fees & commissions.
There are also some forex brokers that offer trading accounts in local currencies like Ksh Accounts for traders to be able transact & trade in their own currency.
Moreover, many brokers also offer demo accounts for you to test the trading environment. You get virtual funds to trade and test your strategy in the markets. Its best to start with a demo account.
So, you need to be able to differentiate in different accounts offered by the brokers and the fees they charge on each account for the instruments you want to trade.
After you have selected the account type you need, you need to click signup for the account type you need and fill your details in the form on the broker’s app or website.
4) Complete the KYC
After you sign up with the broker, next thing is to complete the verification of your account. Verification is mandatory and is required by law to trade through any broker. Most brokers call this as KYC (Know your Customer).
Before you can start executing any trade order or start investing in the market, it is required to complete the KYC verification which requires submitting identification documents, age and address proofs to the broker.
Then broker will activate your account after they complete the KYC which can take 24-48 hours, depending on the brokerage. After which you can download their platform to start trading.
5) Start Trading
Once your trading account is active and then you need to decide on the order that you want to place like buy order on EUR/USD or buy order for 100 Apple Stocks, after which you place trade on that financial instrument through your broker’s platform.
Before executing the trades, it is important to understand the basic terminologies & tools like limit orders, stop- loss, indicators, and many other terms, so that you can trade actively based on informed decisions.
6) Keep track of Market News, Updates & Data
The financial markets are volatile and the prices of various instruments i.e. stocks, currencies, commodities fluctuate almost every second during the active market hours.
Any economic, political, national, or international news can trigger price movements in the market. Hence, it is important to keep a track of the market updates and news concerning the stock, commodity, currencies etc. that you are looking to trade.