Forex trading is getting increasingly popular in Kenya and for good reasons. If you are interested in trying out forex trading in Kenya, this article can be a good start, as we will go through a few of the basic points regarding forex trading in general and forex trading in Kenya.
Forex trading involves purchasing a certain amount of one currency and paying for it using another currency, e.g. purchasing 10,000 United States Dollars (USD) and paying for it with 9,500 Euro (EUR).
The term forex is derived from foreign currency, and is sometimes abbreviated fx.
The global foreign exchange market, which is decentralized and carried out at several different hubs around the world, is the most liquid of all the financial markets. In an average trading day, the equivalent of trillions of USD will be traded on this market. In a survey carried out by the Bank for International Settlements (BIS) a few years ago, the average trading in foreign exchange averaged roughly the equivalent of 7.5 million trillion per trading day. The largest trading centres for forex are located in London, New York, Singapore, Hong Kong, and Tokyo.
The global forex market developed gradually and is today chiefly comprised of central banks, banks, brokerages, institutional investors, and individual traders. Individual traders can access the market through brokerage companies, and this is today possible even for small-scale hobby traders. So called retail brokers cater to the needs of non-professional forex traders, and some of these retail brokers have very low entrance requirements. An individual can sign-up, deposit $/€/£10 and get started speculating on currency movements.
As many prospective forex traders in Kenya have found out, you do not need a big bankroll to get a feel for what it is like to trade forex online. If you are more serious about forex trading, it is however a good idea to save up a slightly bigger starting capital than this, as it will help sustain your trading account through stretches of losing trades. Having a proper risk-management routine in place and the discipline to stick to it is also of imperative importance.
Forex Market Lots
On the forex market, currencies are traded in lots. A standard lot is 100,000 units of currency.
Retail brokers that caters to hobby trader with limited bankrolls permit significantly smaller deals than this. You can for instance open a position for a mini lot (10,000 units of currency) or a micro lot (1,000 units of currency). Some brokers even permit nano lot trading.
When you pick a broker, it is important that you pick one that is suitable for the size of your bankroll. Many long-term successful forex traders in Kenya have started with a very modest bankroll and built it up gradually, but this will of course only be possible when the trader picks a suitable broker that permits small trades and where the commissions does not eradicate the small individual profits that can come from small positions.
In order to be able to open bigger positions, many forex traders – in Kenya and elsewhere – use leverage. When you use leverage, you are essentially tapping into a line of credit extended by your broker. This allows you to open a position using only a smaller amount of money from your trading account – the rest of the position is opened using the line of credit (leverage). Do not use leverage before you fully understand how it works and you have adjusted your risk-management routines accordingly. Leverage will increase both potential profits and potential losses.
Currency Pairs
Base currency and quote currency
The different forex pairs form the basis of the forex market. In essence, you are speculating on the future value of one currency against another currency by purchasing one currency and paying for it using another currency.
The first currency in a currency pair is called the base currency and the second one is the quote currency.
Example: In the currency pair EUR/USD, Euro (EUR) is the base currency and the United States Dollar (USD) is the quote currency. The quote currency can also be referred to as the counter currency.
If the EUR/USD exchange rate is 1.15010, it means that 1 unit of EUR costs 1.15010 units of USD to purchase. To become the owner of 1 EUR, you will need to pay 1.15010 USD.
The base currency is always quoted against the quote currency.
The most traded currency pairs
As of 2025, these are the ten most traded currency pairs on the global forex market:
EUR/USD (Euro/US dollar)
When a currency pair is heavily traded, there is a lot of liquidity in the market, and you can expect tighter spreads and a lower risk of so-called slippage. (Slippage can happen when your order can not be executed at your selected price point because there is no counterpart at that price level.)
Depending on how heavily traded they are, currency pairs are referred to as major pairs, minor pairs, and exotic pairs. At the time of writing, the four majors are EUR/USD, USD/JPY, GBP/USD, and USD/CHF. Exactly where people and institutions draw the lines between majors, minors, and exotics vary – there is no globally accepted definition. Still, it is terms that are good to know since they are frequently used in the forex trading world.
The Kenyan Shilling (KES)
All currency pairs that involve the Kenyan Shilling (KES) are exotic currency pairs and you can expect their liquidity to be very low compared to major currency pairs and minor currency pairs.
The Kenyan shilling has been the official currency of Kenya since 1966, when it replaced the East African shilling at par. The printing and minting of Kenyan shillings are mandated by the Central Bank of Kenya Act cap 491, and the Central Bank is also tasked with sustaining price stability in Kenya, maintaining liquidity in the country´s financial system, and support growth and employment. The bank permits the shilling to float freely against other currencies in the global forex market.
The Kenyan shilling is not only used in Kenya
When we try to understand the role of the Kenyan shilling, including forces of demand, it is important to remember that Kenya has one of the most stable currencies within the East African region. Therefore, the Kenyan shilling is used (de facto) in several African countries alongside the less stable national currency, e.g. when it comes to storing wealth in cash.
KES/USD Trading
On the global forex market, a vast majority of the speculation on the Kenyan shilling (KES) involves speculation on its exchange rate against the United States dollar (USD). This exchange rate and its volatility is impacted by a variety of factors, including GDP, inflation, and BOP.
Based on data collected by the Central Bank of Kenya and the Kenya Bureau of Statistics, we can for instance see how an increased Gross Domestic Product (GDP) for Kenya tends to correlate with the KES strengthening against the USD, while increased interest rates in Kenya tend to correlate with a weakening of the KES against the USD. Also, the release of GDP numbers can increase volatility for the KES/USD and USD/KES pairs. This volatility is normally visible after any noteworthy change in GDP, whether up or down.
Inflation numbers in Kenya are also important, with higher inflation correlating with a weakening of the KES against the USD. Inflation in Kenya decreases the purchase power of the Kenyan shilling in Kenya, and reduces business activity when consumers find it more difficult to afford purchases.
The balance of payments (BOP) is another number that retail traders should pay attention to. The balance of payments (BOP) is a method used to monitor international monetary transactions in and out of a country during a specific time frame, in order to see if the country has a deficit or a surplus. Many countries calculate and publish information about BOP quarterly, and also for every calendar year. Both the private and public sector is included when BOP is calculated. So, in the case of Kenya, all money flowing into Kenya is put into the category credit, while money flowing out of Kenya is placed in the category debit. BOP can impact the exchange rate of a currency against another currency, since it impacts demand and supply. Studies have shown that for Kenya, a long-term BOP deficit reduces national spending which in turn impacts activity in the money market and reduce volatility for the KES/USD and USD/KES pairs.
The valuation of the Kenyan shilling against the United States dollar (and other currencies) will to no small extent depend on the desire of individuals and organizations to hold assets denominated in shillings, and this desire is influenced by their opinion on Kenya´s potential for economic growth and economical and political stability. Forex traders doing fundamental analysis will therefore, among other things, look at Kenya´s economy and economic prognosis. Kenya is today one of the fastest-growing economies in Sub-Saharan Africa, with increased tourism and boosted investments in infrastructure being two very important factors.
If we look back to the late 2000s, we can see how the KES traded for roughly 75 shillings per U.S. dollar. In the 2010s, the shilling decreased in value against the USD, with the exchange rate exceeding 100 shillings per USD by 2015. By late 2023, 1 USD was equal to well over 150 shillings, but in March 2024 the exchange rate dropped to around 130 shillings, and it today, in March 2025, it is still moving up and down with small variations around this mark.
The Forex Spot Market
Example of Spot Forex Trading
The trader Wahome is sitting in his office in Garissa, analysing recent forex market price data. He has reason to believe that the Japanese yen is about to strengthen in value against the United States dollar. Wahome will therefore purchase JPY and pay with USD. If his prediction comes true and the yen appreciates in value against the dollar, he can exchange the yen back into dollars for more dollars than he originally paid for the yens. This is the foundation of forex trading.
The Forex Spot Market
The example above is an example of forex spot market trading. The spot market is the most straightforward of the forex markets, as the spot rate is the same as the current exchange rate.
A transaction in the spot market is an agreement to trade one currency for another currency at the prevailing exchange rate (spot rate).
On the forex spot market, the price (exchange rate) is established on the trade date, but money is not exchanged until the value date. For most currencies, spot transactions are finalized in two business days. A notable exception is the USD/CAD (United States dollar / Canadian dollar), which is always settled on the next business day.
Forex Derivatives
Instead of simply sticking to spot market transactions, a lot of forex traders learn how to use derivatives, e.g. forex forwards and forex futures, to speculate on currency movements. A derivative is a type of financial contract where the value depends on an underlying asset/assets or a benchmark. Derivatives can be traded on an exchange or over-the-counter (OTC).
For a forex forward, the settlement date is further into the future than what it would be for a spot transaction. Just as with a spot transaction, the price is determined on the transaction date but the money is not exchanged until the settlement date (maturity date). It is common for forward contracts to have a maturity of less than one year, but longer contracts can be created as well, as forward contracts are tailor-made to suit the contract partners.
Futures are similar to forwards, but instead of being tailor-made contracts traded over-the-counter, the futures are highly standardized contracts and they are traded on established exchanges. The largest trading hub for forex futures is the Chicago Mercantile Exchange. Since futures contracts are standardized and traded on established exchanges, they are very popular among forex speculators.
Leverage
Many brokers that offer forex trading will also offer leverage, which means that you can open large positions using very little money from your trading amount.
Example: You want to open a $300 position. You put in $10 from your trading account and use $290 in leverage to cover the rest.
Using leverage will boost both profits and losses, and is not a decision to be taken lightly. When you are using leverage, you are essentially borrowing money from your broker to carry out a trade. You are putting borrowed money on the line and this adds a new type of risk. It is important that you fully understand how leveraged forex trading works before you start using leverage, and that you adjust your risk-management routine accordingly.
Questions and Answers About Forex Trading in Kenya
When Can I Forex Trade in Kenya?
When you use an online broker to carry out forex trading in Kenya, you do not have to worry about being available during Kenyan office hours. You will get access to the global forex market, where currencies are traded around the clock, from Monday through Friday.
Because the earth is round and divided into time zones, you can actually engage in forex trading more than 24/5. For important forex trading hubs close to the international date line – such as the ones in Sydney, Singapore, Hong Kong, and Tokyo – it will be Monday when it is still Sunday in New York City. Therefore, a forex trader in Kenya can start speculating on forex early. The whole of Kenya falls within the timezone GMT +3 and Sydney is GMT +10. Conversely, when the forex market in Sydney closes because Friday is over in Sidney, trading will still be going on in New York City, and the online fx trader in Kenya does not have to stop trading.
Are there forex brokers that accept M-Pesa deposits and withdrawals?
Yes, many brokers that welcome Kenyan retail forex traders will also accept M-Pesa deposits and withdrawals.
Introduced in Kenya back in 2007, the mobile banking service M-Pesa is today an important tool for a lot of Kenyans seeking efficient and cost-effective banking solutions. M-Pesa was created and launched by Safaricom, one of the main mobile phone operators in Kenya, and the bank accounts are insured up to a maximum of 100,000 KES by the Deposit Protection fund.
What is an FX CFD and is it available in Kenya?
FX CFD is short for Forex Contract for Difference. It is a Contract for Difference (CFD) where the underlying is an exchange rate, e.g. for EUR/USD or USD/KES. Many online brokers that offer spot forex trading to traders in Kenya will also offer FX CFDs.
When you use CFDs to speculate on currency exchange rates, you are not buying currency from other traders – you are making predictions about a future exchange rate and your broker is your counterpart. This means that when you get it right and make a profit, that money comes from the broker. When your prediction turns out to be wrong and you lose money, the money goes to the broker.
The FX CFD is a contract where the buyer agrees to pay the seller the difference between the current exchange rate and the exchange rate at a certain time in the future (contract time). In other words, the CFD is an agreement between the trader and the broker to exchange the difference in the value of the exchange rate change between the time the contract opens and closes.
As you can see, an FX CFD is a type of derivative with the exchange rate change as the underlying. Using CFDs are usually a very cost-effective way to speculate on currency exchange rates, and this can help increase profitability for the traders.
CFDs are typically offered with leverage and the margin requirements can be very low, which has helped increase the appeal of CFDs among retail traders with small bankrolls. With that said, using leverage will boost both profits and losses, and is not a decision to be taken lightly. This is true for all types of leveraged trading; with or without CFDs.