Should I Invest in Forex? Here Is What You Need to Know

Foreign exchange trading, commonly known as forex, has become one of the most talked-about ways of making money online. In Kenya, it has especially gained popularity among people looking for flexible income opportunities beyond traditional employment.

But while social media often shows screenshots of profits and “lifestyle success,” the reality of forex is far more complex. 

So before you consider investing your money, it’s important to understand how forex works, how people make money from it, and the risks involved.

Also Read: The 5 Pitfalls of Forex Trading in Kenya 

What Is Forex and How Does It Work?

Forex trading is the buying and selling of currencies in a global marketplace. It operates through the Foreign Exchange Market, where currencies like the US dollar, the Euro, and the British pound are exchanged.

For example, if you believe the US dollar will strengthen against the Kenyan shilling, you can buy dollars and later sell them at a higher price for profit.

Unlike stocks, forex does not have a central exchange. Instead, it runs 24 hours a day, five days a week across global financial centres such as London, New York, and Tokyo.

The forex market is the largest financial market in the world, with a daily trading volume of approximately Ksh900 trillion ($9.6 trillion) as of 2025, according to the Bank for International Settlements.

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How People Make Money in Forex

1. Buying and Selling Currency Pairs
   This is the most common method. Traders speculate on whether one currency will rise or fall against another (e.g., USD/KES, EUR/USD).
2. Leverage Trading
   Forex brokers often offer leverage, meaning you can control a large position with a small amount of capital. For example, with 1:400 leverage (the maximum allowed for retail traders by the Capital Markets Authority in Kenya), Ksh 1,000 can control Ksh 400,000 worth of trades. While this increases potential profits, it also significantly increases losses.
3. Short-Term Trading (Day Trading)
   Many traders open and close positions within minutes or hours, aiming to profit from small price movements.
4. Long-Term Position Trading
   Some traders hold positions for weeks or months based on broader economic trends like inflation rates, interest rates, or political events.

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Why Forex Attracts Investors

• Low entry cost: You can start with relatively small amounts of money, such as Ksh1,290 (USD10). This also depends on the platform that you are using.
• Flexibility: Markets operate 24/5, allowing trading at almost any time.
• High profit potential: Leverage can amplify gains significantly.
• Global exposure: Traders can profit from international economic movements.

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The Risks You Must Understand

1. High Loss Rates
   Studies and broker reports consistently show that between 74% and 82% of retail forex traders lose money, especially those who trade without proper training or strategy.
2. Leverage Risk
   While leverage can multiply profits, it can also wipe out your entire account within minutes if the market moves against you.
3. Emotional Trading
   Fear and greed often drive poor decisions. Many beginners chase losses or enter trades without analysis.
4. Scams and Unregulated Brokers
   Because forex is accessible online, it has also attracted fraudsters. Always ensure your broker is licensed by the Capital Markets Authority (CMA) in Kenya. Some platforms promise guaranteed returns, which is a major red flag.
5. Market Volatility
   Forex prices are influenced by global events such as inflation data, interest rate changes, and political instability—making it highly unpredictable.

If you are thinking about starting forex trading, here are the key considerations:

• Learn how currency pairs, charts, and risk management work.
• Start with a demo account by practising without risking real money.
• Avoid “get rich quick” expectations.
• Risk only what you can afford to lose: Never invest essential savings or loaned money.
• Focus on risk management. Successful traders focus more on protecting capital than making profits.
• Choose regulated brokers: Ensure the platform you use is licensed by the CMA and trustworthy.