Kenyan traders may bet on asset price changes by using a contract for difference (CFD). There is a long and short position for Kenyans when they purchase CFDs. The trader gets paid the difference in the event of right speculation, or must pay the difference in the case of the wrong speculation, when the contract period expires.
Understanding the foreign exchange market is essential if you want to trade Forex CFDs. CFDs are just another way to trade currency pairs on the forex market.
One currency is the base currency and the other currency is a quote currency. If one economy’s strength is being measured against another’s currency pair, then the exchange rate is a reflection of that connection. It’s important to keep up to date on the most important technical, political, and economic developments affecting a currency.
When compared to more conventional methods of trading, CFDs have many advantages. One of the biggest advantages of CFD trading is that it requires a smaller initial capital outlay than traditional asset purchases. As a result, they’re an excellent choice if you’re searching for rapid victories.
Legal Status Of CFD Trading In Kenya
Since August 2017, Kenya’s Capital Markets Authority (CMA) has started overseeing the Forex trading business. Investors in Kenya now have access to a wide range of markets, including equities, commodities, and derivatives. Due to the fact that CFD trading already entails significant risks, the option to trade in a regulated market has given Forex traders more confidence.
More than five non-dealing online Forex brokers in Kenya are now regulated by CMA to sell forex and CFDs. Initially, there were four of them, but two of them just obtained licenses. Traders in Kenya use non-dealing forex brokers to connect them to the Forex market. In exchange, the non-dealing broker will get a commission or mark-up spreads billed to the Forex trader by the broker. To put it simply, a money manager operates as your asset manager and invests your money in the currency market or via a non-dealing broker. After verifying that the broker has the essential licenses from a trustworthy industry regulator, you as a cfd trader can be sure of a totally secure and legal experience while trading in Kenya. You need to make sure that your license is recognized in this region. If the granting authority is not respectable, the license won’t be worth possessing. Don’t be persuaded by meaningless certification either.
There is no direct trading or market activity permitted under CMA regulations for the FX broker. Clients aren’t represented in any transactions, and they aren’t given any advice. Trading platforms that are accessible over the internet are their primary responsibility, allowing traders to carry out their obligations from any location using electronic tools.
There is always a risk of hackers attempting to get access to the financial information that is transferred online. An SSL encryption at its finest is something that every respectable CFD broker in Kenya is happy to demonstrate.
Moreover, always make sure you choose a broker that fits your budget or minimum deposit as well as your desired payment method.
How Does CFD Trading Work
When it comes to CFD trading in Kenya there are many things to consider. A sale price and a purchase price are assigned to every contract, and these prices are always somewhat below and above the current market price, respectively. The spread is the difference between the purchase and sell prices, and thus indicates the cost of the deal.
If you believe that the market’s prices will climb, you should purchase many CFD contracts (also called units). Alternatively, if you believe that prices will decline, you might consider selling these futures. On a wide range of financial markets (such as commodities, stock indices and FX), you may trade CFDs (contracts for difference).
Forex CFDs trading is not the same as traditional Forex trading. One of the fundamentals of Forex trading is the exchange of one currency for another currency. GBP/USD is an example of a currency pair that may either rise or decrease in value depending on the strength of the pound versus the US dollar.
When trading CFDs, you may speculate on the movement of an underlying asset using leveraged transactions on currency pairs. Cash-settled CFDs are based on the difference in opening and closing currency prices, rather than a fixed amount of base currency.
CFD transactions do not have a predetermined expiration time. A position may only be closed by placing an order in the opposite direction of where you placed your original order. For instance, if you first purchased 500 contracts, you would then sell them to close this position. In addition, if you are trading on margin, you will be charged interest for each overnight period that your position is open.
Leverage allows you to boost your transaction size while only investing a modest amount of your own money in CFD trading. Increasing your exposure might increase your earnings, but it can also increase your losses.