On average, Nigerian FX traders trade open positions worth at least $1.25 million every day.
The Forex market or the foreign exchange market is the financial market where the currencies and other assets are traded. It is considered to be the largest market in the world. The daily trading turnover in the Forex market is about $6 trillion.
Forex is an OTC market i.e., the participants trade financial instruments directly between two parties, without the involvement of a central exchange or broker. An over-the-counter market is a decentralized market. It doesn't have a physical location - trading is conducted online. In addition to being the world's largest financial market, the Forex market is also the most liquid and highly volatile.
Liquidity reflects how easy an asset or security can be converted into cash without it affecting its market price. Market volatility refers to the speed of price changes that occur in the market.
The high liquidity of the Forex market is easily explained. Like we've mentioned before, millions of trades are performed here every day, with trillions of dollars circulating in the market. Greater liquidity implies lower commissions and transaction costs which is highly beneficial for traders.
Traders from Nigeria can access the Forex market 24 hours a day, 5 days a week. Trading can be conducted with disregard to the trader's time zone, which is also a good thing. It means that once one regional market closes, another one opens. And some markets are even open simultaneously because of the time zone overlap.
Speaking about FX trading in Nigeria, it has become easier here. The country has demonstrated significant economic growth and an increase in disposable income over the past decade.
Nigeria is one of the wealthiest countries in Africa. According to statistics, Nigerian traders open on average $1.25 million worth of positions every day.
There is a great number of FX brokers that allow Nigerian traders to register a trading account and use their platform so that both novice and seasoned can connect to the global financial market.
What All Novice Nigerian Traders Should Know
Knowledge and Education
Beginner traders often make one rookie mistake - they don't obtain adequate trading knowledge before stepping into the Forex market. Before you dip your toe in trading, you need to ensure that you get enough basic knowledge - learn terms and definitions, check out various educational resources to grasp the concept of the market and how it operates. Learning Forex and traders' slang can also be handy. Here are some of the terms and definitions you may encounter:
- Base currency – the first currency that appears in an FX pair quotation. In the Forex market, one currency is always quoted against the other. You literally buy one currency and sell another. In Nigeria, the USD/NGN pair with Nigerian Naira is popular among traders.
- Quote currency - also known as "counter currency," is the second currency in a currency pair. It is used to value the base currency. In a direct quote, the quote currency is the foreign currency, while in an indirect quote, the quote currency is the domestic currency.
- Bid/Ask Price – the bid price refers to the price at which the broker is willing to buy the base currency. The ask price is the price that the broker will ask in exchange for buying the quote currency.
- Spread – the difference (in pips) between the price at which you're allowed to buy (Ask) and the price at which you're allowed to sell (Bid) in a two-way forex quote.
- Pip – measures the amount of change in the exchange rate for a currency pair, and is calculated using the last decimal point. It is the smallest step that a price can move. One pip is equal to 1/100 of the base currency.
In addition to learning basic Forex terms, we highly recommend using a demo account as an extremely effective training tool. Nowadays, almost every reputable broker offers a free demo account. A demo account is a training account with a virtual balance that simulates live trading conditions and provides real-life quotes. It allows newbie traders to test their trading strategies and see how the market works without risking their money.
Why It is Important to Have a Trading Plan
All successful traders know their targets and plan their trades in advance. A trading plan is a set of rules and guidelines that defines the behavior and actions of a trader.
Before they start trading, novice traders in Nigeria need to assess their needs, targets and possible hindrances. This will allow them to avoid emotional or chaotic trading and ensure that they have a clear objective in mind.
A trading plan helps traders to manage their risks more effectively.
How to Choose a Trading Strategy
Once a beginner trader gets a clear grasp of what he wants to achieve in Forex trading and his limitations, he can start searching for various FX trading strategies that can be used in trading or start building his own strategy.
It's better to choose a trading strategy that matches your trading style and your temperament. Also, such factors as self-discipline, time management, commitment, patience and risk-tolerance are imperative when choosing a strategy.
How To Choose a Reliable Forex Broker
When Nigerian traders are looking for a trustworthy broker to perform their trades, there are several key criteria to consider:
- Regulation. Doing business with a regulated broker is imperative for any trader, especially for novice traders. If a broker is regulated, it means that the interests of its clients are protected.
- Favorable trading conditions. Fees and commissions, spreads, various types of trading accounts to meet different traders' needs.
- Educational and training materials, trading tools, market analytics, trading ideas.
- The ability to test trading conditions on a virtual demo account.
- Easy and convenient deposit and withdrawal, various payment options.
- High level of customer service.
What Drives The Forex Market
When traders get started, they need to be aware of the factors that drive the prices and exchange rates in the FX market. Among these factors are:
- Central Banks and their interest rates.
- News, Indicators, Reports.
- Market Sentiment.
Staying up to date with significant news and releases allows a trader to evaluate and assess the situation in the market to make the right trading decision and anticipate future market trends. In this regard, both fundamental and technical analysis can be helpful.
If you want to make money trading Forex, you will need the services of a broker. For example, you can rely on the services of the regulated broker AMarkets, which offers protection of up to $20,000 for traders' accounts.
AMarkets offers a wide range of trading assets to invest in: Forex, stocks, cryptocurrencies and commodities.
Read iHodl and trade with thanks to an exclusive bonus of 20% on your deposit.