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How To Start Forex Trading in Nigeria - a Guide for Beginners

By Stelian Olar, Updated on: Sep 18 2024.

The lure of the forex market, with its vast potential for profit, beckons many, especially in Nigeria, Africa's rising economic powerhouse. But for beginners, navigating this dynamic arena can feel daunting. 

Questions like:

"How to start forex trading in Nigeria?" 

"Is forex trading profitable?" 

And even "is forex trading gambling?" might cloud your mind.

This comprehensive beginners guide to forex trading sheds light on the fundamentals, equipping you to embark on your forex journey with confidence. 

The forex market, or foreign exchange market, is the decentralized global network where currencies are traded. Imagine a vibrant marketplace where countries exchange their currencies, impacting everything from international trade to everyday transactions. Understanding the forces driving these exchanges – economic data, political events, and market sentiment – forms the cornerstone of successful forex trading.

While forex-specific regulation in Nigeria are still evolving, Nigerians can access opportunities through forex brokers regulated outside the country. Choosing regulated forex brokers, ideally licensed by Tier-1 authorities like FCA, ASIC, or CySEC, ensures adherence to strict financial regulations and client protection measures. 

Profit potential in forex trading is undeniable, but remember, it's not a get-rich-quick scheme because akin to any financial endeavor, risks are inherent. Treating forex trading as gambling is a recipe for disaster. Instead, approach it with a disciplined, knowledge-based strategy.

Fortunately, Nigerian traders have access to various resources like online courses, educational materials from brokers, and even demo accounts offered by most platforms. These tools allow you to practice forex trading strategies in a risk-free environment before venturing into live markets.

Key considerations for forex trading in Nigeria:

• Regulation: Prioritize brokers licensed by reputable international authorities.
• Account Types: Explore options aligned with your trading style and financial situation.
• Platform Features: Ensure the platform is user-friendly and offers essential trading tools.
• Customer Support: Opt for forex trading brokers in Nigeria with responsive and accessible support.
• Fees: Understand spread costs, commissions, and other potential charges.

Remember: This guide only serves as a stepping stone, you still have to conduct thorough research, learn the forex trading basics, utilize available resources, and prioritize responsible trading practices.

Is Forex Trading Legal in Nigeria in 2024? 

The answer to the question “is forex trading legal in Nigeria” like the financial markets themselves, is nuanced. While Nigeria's forex market lacks dedicated regulations for retail trading, overall forex trading itself is not illegal. The key lies in understanding the relevant authorities and their roles:

• Central Bank of Nigeria (CBN): The CBN regulates the official foreign exchange market and requires local brokers offering OTC forex products to hold authorization. However, it currently doesn't oversee individual retail trading conducted via foreign brokers.
• Securities and Exchange Commission (SEC): The SEC regulates the capital market and while not directly overseeing forex trading, it is responsible for licensing investment advisors and brokers operating in Nigeria. This indirectly relates to forex activities as some brokers might offer both forex and other investment products.

This regulatory gap allows Nigerian residents to legally trade currencies through forex brokers in Nigeria that are regulated abroad. As long as you report any trading income earned, you can participate in the global forex market. Nigerians frequently open accounts with brokers overseen by stricter regulators like the UK’s Financial Conduct Authority (FCA) or Cyprus Securities and Exchange Commission (CySEC).

While forex trading in Nigeria carries legal leeway, equip yourself with forex trading knowledge through courses, educational resources, and learn about forex trading in Nigeria from multiple sources.

Is Forex Trading Halal? 

While a definitive answer to "is forex trading halal" depends on individual interpretation and specific trading practices, as a Muslim considering forex trading in Nigeria, understanding its compatibility with Islamic principles is crucial.

Understanding Halal and Haram in Forex Trading:

In Islamic finance, halal (permissible) activities align with Sharia law, while haram (forbidden) ones violate its principles. In the context of forex trading, several key considerations determine its permissibility:

• Interest (Riba): Charging or paying interest is strictly prohibited in Islam. Opt for a swap-free trading account offered by some forex brokers, which eliminate overnight interest charges to comply with Sharia principles.
• Uncertainty (Gharar): Excessive speculation and gambling are haram which is why Nigerian traders need to employ sound trading strategies based on backtesting and technical analysis.
• Ownership and Delivery: Ideally, forex transactions should involve immediate ownership and delivery of currencies. This aligns with the principle of avoiding speculative trading based on price fluctuations.

Note* Similar considerations apply to forex trading in other African countries like South Africa.

Ensure Forex Trading is Halal

Seek scholarly guidance and consult a qualified Islamic scholar well-versed in financial matters for personalized advice which helps clarify ambiguities. Utilize educational resources to learn how to trade forex in Nigeria if you’re a Muslim trader abiding by Islamic finance principles.

Is Forex Trading Gambling?

When evaluating if currency trading constitutes gambling, we must examine the definition of "gambling" itself: risking money on an outcome involving chance and luck. Forex trading does involve risk, uncertainty, and the potential to lose funds but unlike casino games, successful trading is based on skill, research, and risk management ‒ not just random probability.

Unlike casinos or lottery tickets, forex trading involves buying and selling currencies based on predicted market movements. You speculate on price changes, aiming to profit from buying low and selling high. This process requires:

• Fundamental analysis: Examining economic data, political events, and global trends to predict currency movements.
• Technical analysis: Studying historical price charts and patterns to identify potential trading opportunities.
• Risk management: Implementing strategies to limit losses and protect your capital.

Difference between Forex Trading and Gambling

As a decentralized global market, forex lacks a "house" with an inherent advantage. You compete directly against other market participants with opposing interests. Major players like commercial banks and multinationals facilitate currency transactions out of necessity, not to explicitly profit from small retail traders.

While the outcome of any single trade involves uncertainty, over time skillful traders can exploit positive expectancy models to capture consistent profits if they know how does forex trading work. 

While forex trading contains elements of risk and losing like gambling, success requires treating trading like a business ‒ stacking the odds favorably before entering trades based on indicators like price action and technical levels.

How Does Forex Trading Work

At its core, forex trading centers around speculating on currency pair exchange rate movements aiming to profit by buying low and selling high. Understanding the fundamentals of forex trading in Nigeria for beginners is crucial before venturing into the market. 

Here are the mechanics of how to trade forex for beginners:

1. Choose a currency pair: Select two currencies you want to trade, like EUR/USD (Euro vs. US Dollar).
2. Open a position: Decide if you think the first currency (EUR) will strengthen or weaken against the second (USD). Buy if you think it will strengthen, and sell if you think it will weaken.
3. Set your leverage: Leverage allows you to control a larger position with a smaller amount of capital, but also amplifies both profits and losses (use responsibly).
4. Monitor the market: Keep an eye on the exchange rate and relevant news that might affect the currencies.
5. Close your position: When you reach your profit target or want to minimize losses, close the trade by buying/selling the opposite amount of the currency you initially bought/sold.
6. Continue learning: If you wonder where to learn forex trading in Nigeria, platforms like Udemy, Coursera, and Investopedia offer beginner-friendly forex trading courses. 

Is Forex Trading Profitable?

While success stories of forex traders making substantial profits exist, it's crucial to understand the reality: forex trading is not a get-rich-quick scheme. In fact, more than 80% of retail traders in Nigeria lose money. So, why is navigating this market notoriously challenging?

• Market Volatility: Currency values fluctuate constantly, influenced by diverse factors, making consistent predictions difficult.
• Leverage: While offering the potential for amplified gains, leverage also magnifies losses, requiring astute risk management.
• Trading Psychology: Emotions like fear and greed can cloud judgment, leading to impulsive decisions and costly mistakes.

How profitable is forex trading in Nigeria

Imagine a forex trader in Nigeria believes the Euro (EUR) will strengthen against the US Dollar (USD) due to positive economic data from the Eurozone. Here's how they could potentially profit:

1. Open a Long Position: They buy 100,000 EUR/USD at the current exchange rate of 1.1000, meaning they spend $110,000.
2. Market Movement: As predicted, the EUR appreciates against the USD, reaching 1.1100.
3. Closing the Trade: The trader sells their 100,000 EUR, receiving $111,000.
4. Profit Calculation: After accounting for spreads and commissions, the trader earns a profit of approximately $1,000.

Mastering how forex trading works, understanding technical and fundamental analysis, and staying updated on market trends is what separates successful traders from beginners. If you’re a beginner forex trader, many trading apps in Nigeria offer demo accounts, allowing you to practice trading strategies with virtual funds before venturing into real markets.

When Is the Best Time To Trade Forex in Nigeria

For Nigerian forex traders, the London session from 8AM to 5PM local time generally provides ideal trading conditions and is the best time to trade forex in Nigeria. Globally, forex trading technically remains active 24 hours a day, 5 days per week across regional time zones like Asia, London, and New York so choosing the best time to trade is a critical component for successful trading.

This guide explores forex trading sessions in Nigeria time and demystifies the optimal hours for market participation:

• Asian Session (12 AM - 8 AM Nigeria Time): Characterized by lower volatility, this session might suit traders comfortable with early mornings.
• London Session (8 AM - 5 PM Nigeria Time): Overlapping with Nigerian working hours, this session sees high activity and liquidity, making it popular among Nigerian traders.
• New York Session (1 PM - 10 PM Nigeria Time): Another high-volume session, coinciding with the evening hours in Nigeria, offering extended trading opportunities.

Different currency pairs exhibit varying activity and price movement during particular sessions based on which markets are open but the London-New York overlap sees the highest overall volume making it the best time to trade forex.

Remember, learning how to do forex trading goes beyond timing, like any trader you still need good forex trading techniques to read what your favorite currency pair will do next. 

What Is the Minimum Amount To Start Forex Trading in Nigeria

Aspiring forex traders in Nigeria often face a crucial question: "What is the minimum amount to start forex trading in Nigeria."

Here's the good news: starting forex trading in Nigeria doesn't require a fortune.

Before risking real money, forex trading demo accounts offer a valuable training ground to learning how to trade forex in Nigeria.

While demo accounts allow unlimited virtual trading for practice, depositing real funds allows Nigerian traders to enter live market positions and retain profits. Most brokers offer a micro account option requiring just a $5 or N4,000 deposit which provides access to the real forex market while controlling risk.

FP Markets one of the best forex trading App in Nigeria, only requires $50 to open a live account and demo accounts are also available. 

The Best Forex Pairs to Trade in 2024 in Nigeria

While exotic and minor pairs offer opportunity, the best forex pairs to trade are the major pairs like the EUR/USD, GBP/USD and USD/JPY which tend to see higher liquidity and volatility.

While less liquid than major pairs, this direct Naira pair EUR/NGN exposes you to local market fluctuations and potential opportunities specific to the Nigerian economy.

While finding the "best" forex pairs is valuable, mastering how to start forex trading in Nigeria requires more than just pair selection. Forex trading for beginners in Nigeria means prioritizing factors like session availability, interest rate differentials, commodity correlations, and optimal trading times from Nigeria. 

What are the Best Forex Trading Brokers in Nigeria

An increasing number of international forex brokers now provide services to Nigerian clients but, the quality and features of these forex brokers vary widely. When evaluating forex providers and trading platforms as a new Nigerian trader, pay close attention to factors like regulation, trading fees, spreads, trading account options, inactivity fees, customer service, and available trading tools.

Leading brokers recommended for Nigerians combine robust mobile apps and desktop trading platforms with competitive spreads and transparent fee structures.

This guide highlights some of the best forex trading brokers in Nigeria.

FP Markets:

• Regulation: FP Markets is regulated by ASIC (Australia), CySEC (Europe),FSCA (South Africa), FSA (Seychelles), FSC (Mauritius).
• Trading Platforms: MetaTrader 4, MetaTrader 5, cTrader, IRESS.
• Fees and Spreads: Competitive raw spreads from 0.0 pips and commission structure ($6 round-turn).
• Account Types: Standard, ECN, Islamic accounts.
• Customer Service: 24/7 multilingual support via live chat, email, and phone.
• Inactivity Fees: No inactivity fees.
• Additional Features: Educational resources, social trading, VPS hosting.

Pepperstone:

• Regulation: Regulated by ASIC (Australia), FCA (UK), DFSA (Dubai), BaFin, SCB, CySEC and CMA.
• Trading Platforms: Pepperstone trading platform, MetaTrader 4 and 5, cTrader, TradingView.
• Fees and Spreads: Tight spreads across major pairs, commission-based accounts available.
• Account Types: Standard, Razor (ECN), Swap-Free Islamic accounts.
• Customer Service: 24/7 multilingual support via live chat, email, and phone.
• Inactivity Fees: No inactivity fees.
• Additional Features: Educational resources, Smart Signals copy trading, Autochartist technical analysis tools. 

Forex Trading Platforms in Nigeria 

Choosing the right forex trading platform in Nigeria is crucial for a smooth and efficient trading experience. Leading platforms meeting local needs provide advanced charting, fast execution, customized notifications and seamless account funding/withdrawals.

Here's an overview ranking top forex trading platforms in Nigerians by key criteria:

1. Pepperstone - Best MetaTrader 4 platform overall for desktop and mobile with fast execution speeds
2. FP Markets – Best trading platform for low spreads from 0.0 pips and deep liquidity via Electronic Communication Network (ECN)
3. AvaTrade - Best mobile app trading platform
4. Interactive Brokers – Best trading platform for professional traders
5. XM Broker – Best spread-only platform without commissions on top trading pairs
6. IC Markets – Top platform technology via cTrader for active traders wanting more control
7. Exness – Excellent all-round platform choice for trading forex and commodities
8. FXTM - Best for trading exotic currency pairs and cryptocurrencies
9. OctaFX - Top local deposit/withdrawal options for Nigerian traders