Beginners Guide to Online Stock Trading in Kenya

Now might be the best time to explore online stock trading in Kenya. In this article, we will outline the beginner’s guide to online stock trading in Kenya. We will identify the key things you should know before you delve into the dangerous world of online trading.

Beginners Guide to Online Stock Trading in Kenya

Welcome, beginners to this enlightening journey!

What’s stock trading?

Now, I know your hands are itching to begin online trading in stocks in Kenya. But before then, what is a stock? How does online trading happen?

First, we will try to understand in Lay man’s terms what online stocks, markets, and trading are all about.

Share – a share is a piece of a company. Say, KPLC has stocks trading in the Nairobi Stock exchange. If I buy shares from KPLC, it will mean I have purchased a piece of KPLC, and I become a shareholder.

If KPLC makes a profit at the end of the year after I have bought stocks from them, the board may decide to pay me back in the form of dividends. This is one way in which shares brings back money to me.

However, the board may decide to plough back the profits. When this happens, the stocks I bought may appreciate hence the term growth stocks.

To be able to buy these stocks, I would need the help of a broker. A broker, therefore, is someone who is licensed to trade in shares through the exchange.

An exchange is like going to the shop to get bread. You will give the shopkeeper some cash, and in exchange, they will provide you with the bread.

Nairobi stock exchange is an example of a significant exchange trading in East Africa.

Online stock trading in Kenya, therefore, happens when buying and selling stock happen online. As a result, one has to do all the work of deciding which stocks to buy, loading money in the account, then request the trades yourself.

Given that now we understand the whole concept let’s delve into other prerequisites of online trading.

How to select the best online broker for online stock trading in Kenya

As a beginner, before you begin trading online, you need to have an online broker to trade.

Seeing that there are many sites currently offering online stock trading in Kenya, it may be an uphill task for a beginner to know which stockbroker to use.

Here are a few things to consider to guide you to get the best online stock broker:

  • Frequency of trading – Some brokers will charge the account activation fee. If you know, you might not frequently be trading. This may be an expensive account to keep. Therefore, there may be a need for you to select a broker who does not have these charges.
  • Amount of cash you would like to start with – Most online brokers require you to have a certain minimum amount of money in your account before you start trading. The amount begins from KES 10,000. There are others, however, which will require you to have more.
  • Level of experience – assuming that you are a beginner, you will require a lot of assistance in making trades. Therefore, there is a need to select an online broker who offers market research.
  • Broker fees charged – different brokers charge differently. It is only wise to choose the best brokers while maintaining minimal operational costs.

Some of the best online stock trading brokers in Kenya are:

  1. KCB Capital group
  2. Standard Investment Bank
  3. NCBA Capital Limited
  4. Genghis Capital Ltd
  5. Dyer and Blair Investment Bank
  6. AIB Capital

Read More: Stockbrokers in Kenya 2020

Opening an online stock trading account

To trade in stocks online, you will need a Central Depository System (CDS) account.

A CDS account is an account that is provided by the Central Bank of Kenya.

One can open this account from any licensed agent or from the Central Bank itself.

There are a few documents that you will be required to provide to open a CDS account:

  • A filled and signed CDS 1 form
  • Copy of ID/Passport
  • Two coloured passport photos
  • Your payslip/bank statement as evidence of income
  • Present proof of physical address

Read More: How to buy shares in Kenya

Making Trades

Once you have opened your account, the next step is to load it with money that you will be used to make trades.

However, before you do that, you need to do extensive market research on the mix of stock you would like to buy.

There are many companies listed on the Nairobi Stock Exchange. However, not all of them are headed in the right direction.

Ask yourself what would be the ideal companies that you would like to be part of? This way, you will identify the best companies to buy your stocks from.

Related: List of Forex Brokers In Kenya

The next step is that after choosing the stocks, the amounts will be deducted from your CDS account, and you will become an owner.

Conclusion: Online Stock Trading in Kenya

Trading in stocks has always been a risky affair. It is even riskier when one has to trade online in stocks without the help of a broker.

Over the years, fraudsters have invented schemes to try and defraud unsuspecting investors of their hard-earned money.

Be wary of the following:

  • Companies providing fraudulent information – Some public trading companies in Kenya may decide to overstate their profits to attract more investors.
  • Pump and dump schemes – People are selling a sure thing about a specific stock to push the share price up. Once the prices go up, the advertisers sell the stock and dump everywhere.

As a beginner, it is imperative to read as much as you can about online stock trading before starting. I hope that this beginner guide will serve as an excellent place to start.

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Mary is one of the leading writers on Urban Kenyans. She is knowledgable on matters Kenya and has been able to educate many Kenyans on this platform.

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