It should be noted that the value of a currency is influenced by certain forces such as political events, economic policies, trade flows and so on. All those aforementioned factors affect the supply and demand of Forex.

As per BIS report, an average of $6.6 trillion is traded daily in the Forex market globally.

There are over 35,000 active retail forex traders in Ghana despite the fact that forex trading is not regulated yet. The availability of internet access in almost every part of Ghana and international forex brokers aggressively marketing their online trading platforms which can be easily downloaded has made Ghanaians pick an interest in forex trading.

The regulations for Forex trading vary from country to country. In some countries, it is banned, in some, it is restricted. In some countries like Ghana, it is not illegal, but there are no official regulatory authorities monitoring the activities of retail online FX brokers unlike in Kenya and South Africa.

We will be discussing Forex regulations and practices in Ghana compared to others.

An online forex trader can buy or sell a currency depending on her/her bias.

Let’s say a trader wants to trade EUR/USD. If the EUR/USD exchange rate is 1.1100, it means it will take 1.11 USD to buy 1 EUR.

Assuming you speculate a rise in the EUR/USD exchange rate, then you could buy 100,000 EUR by selling the US Dollar at the quoted exchange rate.

Now, assuming the EUR/USD exchange rate appreciates to 1.12, a trader could easily compute his trading profits. He could also record loss if the exchange rate experiences downward trajectory depending on the conditions of the market forces.

At present, it is estimated that there are now about 1.3 million Forex traders in Africa; with South Africa, Nigeria and Kenya having the largest number of retail traders.

Ghana is not far behind & the number of online traders in Ghana is growing very quickly every year. Forex trading activities have experienced considerable growth for the past two decades, thanks to massive enlightenment on trading; coupled with expansion of internet penetration which made this possible.

The growth in the region has since attracted some large international Forex brokers to Africa: ForexTime (FXTM), IC Markets, Plus500, and so on.

But unlike some other African countries, Ghana lacks full legal regulatory framework for Forex trading.

There is currently no regulatory framework for Online FX Trading, but the government has put some measures in place with a view to creating an oversight into the activities of brokers that may want to take advantage of unsuspecting traders.

Karan Singh from Safe Forex Brokers, a forex broker research portal, warns that all the forex brokers operating in the region are unregulated foreign forex brokers. Most of the brokers in Ghana are not even regulated with any Tier-1 regulators like the FCA in UK, which makes them very high-risk brokers. Due to the lack of regulation on the activities of online forex brokers, estimated losses could be in millions.

As there are no locally regulated forex brokers, the forex traders in Ghana trade via foreign forex brokers. These brokers are generally registered in European countries, while some are regulated in offshore jurisdictions like Belize for example.

Most traders start forex trading because there are low barriers to entry, and anyone can start via a device like a laptop or a phone connected to the internet.

Here are some of the steps involved generally, which have been explained to us by local traders.

1. Getting Self-Educated

Most of the forex traders in Africa are self-educated & don’t necessarily have a formal background in finance.

When a user discovers online forex trading for the first time, most of them start by learning about it.

There are a lot of free resources available online that cover concepts of forex trading like trading sessions, currency pairs, factors that move market forces and so on.

2. Choosing a brokerage firm

Despite the fact that there is no official regulatory framework for retail Forex trading in Ghana, traders who still want to trade do so via foreign brokers. But there are brokers that are not regulated anywhere, which makes them very risky.

Traders often choose FCA or similar licensed international forex brokers.

Every forex broker states the name of their regulator/licensing body on their website so once you get the name of the regulator you visit the regulator’s website and verify if your forex broker is actually regulated/licensed by them. If you cannot find the name of the regulator on your forex brokers website it may mean they are a scam and it may be time to consider a new broker with complete credentials.

Internationally acclaimed regulatory bodies with a track record of excellent market supervision include the Australian Securities and Investment Commission (ASIC), Financial Conduct Authority (FCA) in the United Kingdom etc.

Also, when choosing a broker, you should also look at some factors such as: Transaction cost, deposit and withdrawal policy, quality of trading platform and security. You need to do in-depth analysis before you finally settle for a forex broker

3. Open a trading account

Almost all brokers offer demo accounts which allows new traders to trade with virtual money first without losing any real amount of money.

Experts have pointed out that before trading with a real account, you should first gain some considerable experience using a demo account. By using demo account, you will have a real experience of what Forex trading entails and this goes a long way in managing your trade well.

Once traders are experienced enough, many start to trade on a Live Account.

There are many risks for forex traders in Ghana.

One major risk is scams. There are many fake brokers & scammers that target the general public with the promise of making high returns for them from forex trading. Many people fall for such scams & they never get their money back.

The second major risk faced is the use of margin or leverage by traders.

Leverage is the money borrowed by the trader from his Forex broker to trade. Ghanaian traders should know that International Forex brokers will like to offer you high leverage because it is to their own advantage, and also because there is no regulation limiting the amount of leverage that brokers can offer to traders in Ghana.

It is very important for you to understand both the merits and the risks of trading with leverage, most especially high leverage.

A leverage ratio of 100:1 for example shows that you can engage in a trade up to $100 for every $1 in your trading account. The potential profits multiply as the ratio increases.

However, don’t be totally carried away by the above impressive figure because when leverage works in your favour, it augments your gains considerably. If your trade doesn’t go to the direction you want, it will greatly increase your losses and you can even lose all your trading money.

On the other hand, low leverage with good capitalization would not give you any cause to lose much the way it will do with high leverage.

The bottom line is that a trader should always ensure to fund his account with the amount of money he is comfortable losing and ensure that he trades with leverage that he can handle.

You should note that trading with low leverage is not a bad idea in Forex trading, it is how you manage it that matters.

The third major risk is the risk of losing money.

Naturally, every trader wants to continue to win and cut losses in Forex trading. But at the same time, you should know that most of the retail traders lose in forex trading. So, the probability of your winning is extremely low.

A stop loss can help in limiting the losses & is a very vital trading tool, especially for new traders to stop losses.

A stop loss order can simply be defined as a trading tool that is used in limiting losses from a particular trade. It enables the trader define a “stop price” of an underlying asset such that once the value of the asset crosses the stop price, his position is automatically closed out and a market order is triggered to buy or sell the asset at the next available market price.

You can minimize your risk exposure per trade with a stop loss. But it does not mean that you will not lose. As high as 85% of retail forex traders lose as per industry stats, so you should trade with caution & not put any money that you cannot lose.

It is best not to trade forex online until there is a local regulation in place to safeguard traders from these risks.