Featured Forex Brokers

Here are our best rated forex brokers for Nigerian traders. We have listed these brokers after checking out all the popular brokers in Nigeria & then comparing their - spread (and non-trading fees), regulations, local funding & withdrawal methods, platforms, support & 8 more factors.

Hotforex Logo
Hotforex
Benchmark Spread on EUR/USD is 1.2 pips on average with Premium Account
Hotforex is regulated with FCA, FSCA & CySEC
Trading available on 49 forex pairs, 1000s of CFDs
Start with $5 deposit (Mini Account)
XM Logo
XM Trading
XM's lowest Spread on EUR/USD is 0.8 pips with Ultra Low Account
Regulated with ASIC (Australia), CySEC
Trading is available in 57 forex pairs & 1000+ CFDs
Min. Deposit is $5
Tickmill Logo
Exness
Spread from 1 pips with Standard account.
Regulated with FCA (UK), CySEC
Trading available on 100+ currency pairs & 1000s CFDs
Min. Deposit is $1
FXTM Nigeria
ForexTime (FXTM)
EUR/USD average Spread of 2 pips with their Micro account.
Regulated with FCA, CySEC & FSCA
63 currency pairs with Micro MT4 account
Min. Deposit: $50 with Micro Account

Benjamin

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TradeForexNigeria Editor

In this guide, we will explain everything that you need to need about trading forex in Nigeria.

We will start from what forex trading is, to its risk & how you can start. Reading this full guide would take about 30 minutes.

Steps to start Online Forex Trading in Nigeria:
  1. Understand what is Forex Trading
  2. Learn how the Currency Trading market works
  3. Know the forex trading terminologies & basics
  4. Open a Forex Trading Account with a broker in Nigeria
  5. Test the forex trading strategies on Demo
  6. Continue to trade on demo & only fund your live account when once you are profitable

Are you interested in the economics of a country? Possess knowledge on factors affecting the GDP of a nation on a micro as well as macro-economic level? In that case, trading in the forex markets can be an option for you as a trader.

Forex markets involve the highest volume of trading with the use of margin. Forex trading involves buying and selling of a currency pair, each currency pair has a numerator and a denominator.

For example: 1 USD = 500 NGN, in this case the value of one currency (USD) is calculated in terms of another currency (NGN). Here NGN is the “base currency” and USD is the “quote currency”.

Generally, the stronger or less volatile currency takes the position of quote currency and vice-versa. In this case the FX Rate quotation will be NGN/USD = 500. Forex trading has its uses starting from retail investors, pension funds, global banks, governments, and major corporations.

If a trader takes a long position on an NGN/USD pair, it means that the bet is on the strength of USD against NGN, if the value of USD increases in comparison to NGN, the currency pair’s price moves higher. On the other hand, when NGN’s value increases in terms of USD, the trader takes short position.

Forex Markets are used heavily to hedge and is a key component in different derivative products. For example: If a retailer has payments to be received in a foreign currency and are expecting that the FX pair value will go south in a couple of months, they usually buy FX contracts to lock in the FX rates and get guaranteed amounts at the mentioned payment dates.

We will learn more about the usage and market mechanism of Forex Markets in later parts of this guide.

The International Forex Market comes at a valuation of an estimated $5 Trillion. If it were a country, that would have been the 3rd largest country after China! Well in layman’s terms, any transaction that is span across borders or countries involves the International currency market.

For example, if you want to visit Europe, being a Nigerian, you will need Euro dollars to purchase, travel or even to stay in Europe. This is facilitated usually by a Bank who can convert the NGN held by the traveler to EUR dollar at the FX rate on the given date.

This is applicable vice-versa too. There are many non-residents across every country, to send funds to their loved ones back at home, international currency markets come to the aid. In fact, remittances in the year 2020 was close to 500 billion USD, such is the importance of forex exchange (FX) markets.

Large capital investors require FX markets too, for investing in the country’s financial markets or businesses. These are just few examples of FX markets usage, there are plenty more.

History of Forex and its importance:

Forex market can be termed as one of the oldest existing markets, at least its existence is supposed to date back 2500 years ago. Greeks and Egyptians started to trade silver and gold coins based on their actual weight and size.

500 years post the first event, the Roman empire started minting coins on a centralized basis and started currency trading accordingly. 500 years ago, the first forex market was built in Amsterdam. This was one of the key moments for Forex market history, as currencies were freely traded to stabilize currencies across the world. This then spread across the entire world.

Forex Trading firms had grown exponentially and continued to grow in the UK. Today the most traded currencies are USD, EUR, JPY, and GBP (arranged with highest to lowest volume). Important historical events for FX Markets would include the Bretton Woods conference held in 1944. It was a group of 44 countries coming together to decide that USD would be the back of the present-day FX markets and gold can be valued in USD terms.

At that point in time 1 ounce of gold was agreed at USD 35, today it trades at around USD 1800! Policies including the Smithsonian agreement and Plaza Accord led to depreciation of the USD against all currencies in the free float market. This went on till 1990s until the Internet Trading started wherein anyone with the help of few clicks started to trade currencies and not only the top 5 but every other legal currency too. With more and more trusted participants joining forex trading, this became a very robust asset class and is now pegging at USD 5T transactions each day. We will now understand how these currencies are traded in the current forex markets.

The modern FX market is driven by financial derivative instruments that are used by traders and investors. ranging from FX futures, forwards, options and even CFDs. There are majorly 4 types of transactions that take place in forex markets and we will discuss them all briefly:

Spot Transactions

Spot basically means immediately. Forex traders are involved in spot transactions when currency pairs are bought or sold in the market at “spot prices” and the delivery is usually within 2 days. The asset being traded using the spot rate is usually a futures, forwards, or option contract.

Given the rate is uncovered at the current market situations, liquidity is high and placing orders with less spread between the bid and ask price is expected.

Forward Transactions

As the word indicates, Forward transactions involve trading of futures or options using forward rates that are deliverable at a future date. The future price fluctuation is locked in such transactions benefitting buyers in case of high volatility.

Forward transactions have issues of liquidity when compared to spot markets. However, given that rates are locked it helps in case a trader wants to lock the price for an extended period with the help of a “roll” feature available for such contracts.

Swap Transactions

If Party A requires AUD currency while residing in Europe and Party B requires EUR currency residing in Australia, they would want to indulge in a currency swap transaction. This basically leads to Party A paying AUD to Party B in exchange for EUR, so that both the parties can fulfill their needs.

Usually, these transactions are over the counter, which basically means the trades is directly done between the parties without any intermediary. They can be marked-to-market, which values the amounts exchanged are equalized using the AUD/EUR FX for an agreed date.

Option Transactions

Similar to future contracts, option contracts are traded on exchanges with the underlying of a FX currency pair. Whenever the price of the currency pair moves high or lower, the contract value moves accordingly. Options are heavily traded in the markets given the low initial payment required in the form of premium. Most corporates and banks use FX option contracts to hedge their bets in other asset classes using exotic option products which limit losses for investors while providing the benefit of market price action.

As previously mentioned, exchange rate is the rate at which 1 currency can be bought in terms of other currency. However, it is very critical to understand why the rate is pegged at a current rate and why does it move in the first place?! Let us understand briefly the 5 main factors listed below briefly:

Inflation - Inflation is the increase rate in terms of prices of goods and services. If the Inflation of a country levels highest rates, this is a growing concern for its economy as this signals the lack of GDP produce of a country as well as weakening demand for its country’s products. The country is dependent on imports from other countries or has a failed economic policy in place.

Interest Rates – Inter-linked to the above point, interest rates are the rate at which the central bank allows its banks and financial institutions lend the country’s population. If it goes high, it implies excessive money circulation in the market. Usually interest rates have a inverse relationship with the country’s inflation rate and hence is critical for a country’s economy.

Monetary Policy and implementation - When the central bank of a country announces its monthly or quarterly reports, markets are volatile. The reason behind the same is the faith that the market has on the central bank of each country and its concrete decision-making ability for the sustainable growth of the country’s economy. When Godwin Emilie (Nigerian Central Bank Governor) announces the inflation rates or country import/export results, markets usually react on the news.

Geopolitical stability - When Venezuela started going through a crisis after the oil price crash, it became very evident that the country’s economy is in deep trouble. The country started having street fights and riots in protest and is still one of the poorest Latin American countries. This had a massive impact on the inflation and hence the Venezuelan bolivar crashed record low levels of economy depletion. Now, 1 USD = 355 billion VEF. Therefore, it is very important to know the stability of a country’s economy and how it affects the exchange rate of the country’s currency.

Import/Export - When the country’s export increases in comparison to exports it helps in strengthening its economy and thus the forex exchange rate. More the produce of export, means more is the amount of profit/capital available to spend in the country for growth purposes and hence the increase in FX Rates. This is very crucial and import/export reports often get the market excited on future outcomes.

Important terminology of Forex:

Now that we have understood the main factors affecting forex markets and the types of transactions taking place, we will move on to understanding the basic terminologies of the market in a minimalistic way.

Currency Pair – Currency Pair defined is the combination of two currencies clubbed as a pair which numerically defines what is the worth of one currency when valued against the other. USD/NGN as well as NGN/USD are both valid currency pair. However, the values will be inverses whenever we inverse the currency pair numerator and denominator.

Base & quote currency – Base currency is the currency which sits in the numerator and quote currency sits in the denominator while FX calculation. For example: USD/NGN, here USD is the base and NGN is the quote currency. So, we will the NGN in terms of the USD. Here 1 USD = 411 NGN. On the other hand, in case of NGN/USD, the components are completely inverse. Here 1 NGN = 0.0024 USD

Major/Minor/Exotic currency – The market is split across many different types of currency pair. Any pair which contains USD and a developed market currency is considered major currency. Example – EUR/USD, USD/CHF, GBP/USD, JPY/USD, etc. Any other developed currency which has high market liquidity but doesn’t contain USD in the currency pair, example – EUR/GBP, EUR/JPY, JPY/AUD, NZD/GBP, etc are considered minor currencies. Exotic currencies on the other hand are emerging market currencies, which are less liquid and more volatile, therefore these are non-deliverable currencies. Non-Deliverable currencies are those currencies which cannot be transferred or delivered in a financial transaction while trading futures, forwards, or options. This is mainly due to the instability and higher downfall probabilities in those currencies. Example are ZAR, MXN, TRY, INR, MYR, etc. One thing to note is more developed a country, smaller becomes the range for fluctuation of that country’s currency in forex markets.

Pips – Pips or Price in point reflects the tiny amount of change in forex rates. Usually 1 pip represents 0.0001 change in the price of a currency pair. So, 1 pip is equivalent to 1/100th of 1% move in a currency. It is kept this low to protect investors from huge fluctuation in prices. A higher pip would have havoc change in prices creating panic among market participants. This means USD /EUR can move from 1.1754 to 1.1753 or 1.1755 at one tick rather 1.18 or 1.16.

Leverage – Leverage is a facility provided by brokers while trading forex using financial instruments. Here an investor can purchase or sell instruments in multiples of money initially invested. For example – one can buy 1 lot of EUR/USD futures contract by investing USD 1000 whose market price is USD 5000. In this case, leverage is 5 times or 5x = 5000/1000 = 5. However, leverage varies from broker to broker, so its better to know the leverage rations beforehand.

Bid/Ask Price – Bid and ask price to represent the buy and sell price of an asset in the market accordingly. Bid is usually less than market price and ask is usually higher. The psychology of market is to buy as low as possible and sell as high as possible. Therefore, forces of bidders and askers in the market drive market trends.

Spread – The difference between bid and ask price of a financial instrument is known as spread. If the bid price is 1.1753 for EUR/USD and ask is 1.1755, then the spread is 1.1755-1.1753 = 0.0002. Higher the spread, higher is the illiquidity of an instrument. Markets can never have 0 spread as there is always a difference between bid and ask prices.

Lot Sizes – Lot size is usually the number of underlying assets comprising the Nominal and the FX rate. Take for example: 1000 units of the EUR/USD FX dollar cost 1.1753*1000 = USD 1753. The minimum units are defined in the contract. Usually it is 1000 units but can also start with 10,000 units in case of forward contracts.

Trading Forex in Nigeria is like trading in other major financial markets but with few exceptions.

We will discuss the same and the alternative options available accordingly. All we need is close to USD 100 or close to N500,000 for a mini trading account. Explained below is a step-by-step guide:

  • Knowledge of basic FX concepts – Before starting anything in the forex markets, its crucial to know how derivatives like futures and options work. If CFDs are traded, what are the risks to be taken and what are the impacts of leverage on a trade position. Basic market concepts like Stop loss, take profit and trade size positioning should be understood. The economics related to the currency pair must be well understood too in addition to market psychology.
  • Comparing Brokers – Each broker has its own sets of criteria and commission charts, but the standard market prices are similar across brokers. Say for example: Hotforex allows customers to start trading with USD 5, whereas FXTM have USD 50 minimum depost. IC Markets provide spread of 1 pip on EUR/USD, however FXTM provides spread as low as 0.3 pips (plus commission). So, to open your first forex account, comparative analysis of accounts at each broker is the key!
  • Open a Forex Account – Procedures like KYC, Bank account verification and customer data filing is important and leads to the broker opening the account in usually 24-48 hours for trading.
  • Account Type – There are many account types for trading forex such as micro, Mini, Standard, VIP, etc. Each account type comes with an initial investment amount to be deposited and as per the names start small at micro and go higher until the vip accounts. New Investors can start anywhere between micro and mini accounts and can move ahead with the experience.
  • Demo Trade – Before starting to trade, many brokers provide demo accounts which provide the entire feature of trading platform. One can also start with paper trading. trading without real money to gauge their trading skills.
  • Trade – Once all the above is completed, trades can be made with low levels of risk for beginners and recommendable instruments to start would be a normal currency pair and later moving on to derivative instruments.

In this section, we will discuss about the various aspects of forex trading platforms in detail, which will provide you a deep insight on features affecting the daily trading in forex market. Forex markets as we spoke earlier have high frequency and liquidity across major and minor currencies, therefore traders often end up paying high fees or maintenance charges eating up their profits. It is very important to understand the advantages and disadvantages of selecting a particular broker before trading. Let us look into 6 of such factors which is crucial:

  • Minimum Deposit and Fees - First and foremost, it is very important the commission or fees rate a broker has as discount brokers provide very cheap when compared to institutional brokers. Other fees like maintenance and minimum fund limit should also be checked before selecting a particular broker.
  • Broker regulation/compliance history – Brokers have in the past provided heavy leverage across clients and regulators have had to intervene and decrease leverage ratios to curb high risky transactions. A proper check if the broker has been historically fined or were subject to scrutiny by Financial authorities must be verified.
  • Spread/Liquidity – Liquidity as mentioned earlier is a major factor while trading forex markets. There are brokers who provide high liquidity and best bid/ask prices while others comparatively perform weakly. It usually is the case with the increase in liquidity, spreads start shrinking and trading becomes more slippage free for traders. Therefore, before selecting a broker, their liquidity history must be statistically checked.
  • Range of Products – To the core of any brokerage business is the range of instruments including futures, option, CFDs, swaps, etc. Usually for retail investors, it becomes very important to be provided with all kinds of products as that helps them with diversify or hedge their risks. For example, a huge leveraged CFD bet can be hedged with an exotic FX option.
  • Currency pair- Again only top forex brokers like Markets.com, Pepper stone and IC Markets provide highest number of currency pair trading. That means even if you have a great idea about an exotic currency pair making massive moves in a short period, you would not be able to trade it until it is available at the broker. In this case, Markets.com with 120 such currency pair has highest probability of providing the service.
  • Customer case – Last but not the least, like another other business, customer service is crucial to a satisfactory user experience. Glitches are common across brokers, if there is very slow or near to no customer support experience, there might be financial implications to it. To mitigate such operational risk, customer service feedback of the broker becomes mandatory.

Having opened an account, we need to place orders for making profit! How do we do that if we do not have enough ideas or trading strategies for it. Therefore, we shall discuss few strategies briefly split across fundamental and technical strategies.

Fundamental:

Economic Data – When the central bank or the finance ministry announces data like CPI, Producer price, retail sale, purchasing manager’s index, import/export data, GDP and Housing Data, the markets are usually volatile. If one can predict the correct range of a FX currency post the results are announced using different fundamental analysis techniques, they sure can take in handsome profits. Therefore, keeping a round-the-clock eye on the economic data becomes crucial.

Oil Prices – When OPEC announces current barrel rates, the markets usually plump or dump in that situation. Middle eastern countries are heavily impacted by the same. When Saudi Aramco (world’s largest oil processing factory) was attacked by drones, the markets took a hit on an expected delay in oil production. Oil prices affect each good in a country. Therefore, rising oil prices depending on the oil dependence of a country, impacts the forex reserves as well as the FX exchange rates.

Geopolitical Activity – When Brexit was first announced, strength of GBP started decreasing against every other currency. It went all till a year until, Britain economic numbers portrayed Britain’s independence in terms of global trade. Therefore, geopolitical or government stability create havoc opportunities for traders in the market to create profitable trading opportunities.

Technical Analysis:

Swing Trading – The most popular type of technical analysis trading strategy used in forex markets using the swing trading approach. Here, the trader relies on support & resistance, moving average, RSI, and range breakout levels. If either one of the technical indicators are met, they usually buy or sell for a very short period usually 1-2 hours to 1-2 days depending on trading horizon. They hold until the levels are maintained, if they are broker, the position is exited immediately.

Scalping – Technical traders are also very fond of scalping or small ups/down in prices. Usually trades are held for a very tiny amount of time like 1 minute or 30 seconds when a large uptick/downtick is expected. Given the time frame, this takes place multiple times in a day increasing the transaction cost. Here data looked at is tick by tick data, which can be even second by second data, candle charts are adjusted to the lowest possible time frames, to anticipate the move and execute a scalping strategy.

Carry Trade Strategy – Carry trade involves borrowing one currency at a lower rate, however the other currency is invested at a higher return rate. This usually depend when the interest rates are volatile and only when currencies can be carried forwarded for weeks or even months.

As discussed previously, FX markets are one of the most volatile as well as liquid markets. It is not driven by market participants but by countries globally. Risks in this market is very different than other asset classes. Let us discuss few risks in detail:

  1. Volatility – It is nothing but the truth! Volatility and uncertainty mount during crucial new events or country-specific economic data speculation. Either ways, markets are risky, a precaution while trading or position sizing will help during high VIX levels.
  2. High Leverage – Brokers end up providing upto 100x leverage on forex trading. This is not ideal in cases if a trader is not aware of the risks being taken in anticipation of higher profits. High leverage comes with high loss-making situations and that can cause havoc losses if the position takes a turn against the market movements.
  3. Liquidity Risk – Imagine a situation where you have bought 100 lots of AED/MYR FX Futures contracts and suddenly there is an extremely good news across both the currencies. Now what happens is bidders in the market mount up like anything and sellers are rare. The imbalance in demand and supply increases the spread and hence dries up the liquidity. Until sellers are available, you would not e able to exit the position and this is liquidity risk.
  4. Interest rate risk – Interest rates are one of the key drivers in any economy. When interest rates are increased by the central bank, usually the currency moves downward as it shows incapability of producing efficient output by the country. Therefore, to curb those risk, traders must be aware of various economic factors leading to interest rate risk.
  5. Phishing/Scam – Forex by volume has the largest number of scams and so called “gurus” predicting markets trends. Scams include fake market news, fake trend setting strategies and online channels provoking forex market bull or bear runs. Given it runs globally, its hard to guess where the scam is being run from. Therefore, traders must be aware of such scams and be away as much as possible.

Risk Management strategies in forex:

Now that we know the kind of risks that can occur in forex markets, below are some techniques on mitigation of such risks:

  1. Systematic Trading - When a trader knows when to enter and when to exit, that is the perfect trade position he/she can take. So, one can set targets when to book profits and when to exit positions to discontinue unsystematic trading style which is extremely risky. Market standard is 1% take profit and 2% stop-loss. Therefore, systematic trading is the first step towards risk mitigation.
  2. Order Type – There are market order, fill or kill, fill, or cancel, limit orders, etc. while trading forex markets. Each order type has its own attribute but each one has a different risk attached to it. Market order is the riskiest as it will fill orders in the current market price and does not take in consideration if the price executed is way above or below the trader estimated price. Therefore, it is crucial to decide on limit / fill or kill orders to mitigate price action risk.
  3. Stop loss and Trailing Stop Loss Trigger – Traders are usually not satisfied by limited upside profits; therefore, they can execute a trade with trailing stop loss. In this case, the stop loss will come with a feature of a fixed stop loss limit. For example : If the FX pair is trading at 1.2 and trailing stop loss is at 0.05%, whenever the price surges and takes a turn and start falling, the exit order will be executed when it falls 0.05% from the last high. So, in this case, a trader can enjoy sky high profits with downside protection.
  4. Negative Balance Protection – In order to protect traders from hitting their deep margin levels and running a negative balance on the brokerage balance, brokers usually cap the floor margin rate. What this means is if a trader goes through heavy downfall in position, it will auto exit when the margins are hit with 0 amount left to spare. This feature must be selected and activated while trading forex.
  5. Statistical Analysis – Ratios like beta, sortino and sharpe can critically mention the risks taken in the trade to earn each dollar of profit. A beta of 2 means that when the market is up 100%, a particular forex strategy is up 200% and vice versa when it falls. This is not a good size for a strategy. Drawdowns can conclude the amount of fluctuation in a strategy. Therefore, statistical analysis of trading days should be understood to mitigate risk.

Forex Trading in Nigera: Q&As

What is Forex Trading?

Forex or Foreign Exchange trading involves speculating on the price fluctuations of currency pairs and exchanging them with an intention to make a profit with each trade.

Unlike stocks, currency trades are in pairs. NGN/USD is one example. If you buy the pair, you are buying the NGN and simultaneously selling the USD and vice versa.

How can you start Forex Trading in Nigeria?

You can trade Forex online by opening an account with a forex broker that accepts Nigerian traders. Online FX Trading in Nigeria is still unregulated with no local regulation in place currently; hence we recommend you sign up with the brokers regulated by foreign top tier market regulators such as FCA, FSCA or ASIC.