Online trading is booming in Nigeria as it’s fairly easy to open an account, fund it and start investing.
Many start it as a side hustle at the beginning (you can start $100 or less) and then increase the amount of money they invest as they get better at it. What markets are there out there? How to get better as an investor? How to choose a reliable platform? Stick around, we have compiled a thorough guide on online trading 101, going over markets, ways to smash it as an investor and popular platforms.
Let’s kick off.
Top Trading Markets
The good news is that there are plenty of markets you can invest in.
The bad news?
Which one should you choose?
Let’s go over all the different markets you should consider investing in.
Forex
Forex is the combo of two words: foreign and exchange.
It’s probably the most popular market to invest in for a good reason.
It’s simple and beginner friendly.
As you can probably tell by the name it has to do with exchange of different currencies, a common phenomenon in travelling abroad and international product and service trading.
Say for example, you want to invest in USD/EUR and the price stands at 1.2548. This means that you exchange USD for EUR. If the value of the currency you own (EUR) goes up and you decide to sell your currency, you make profit.
The good thing about Forex is that it’s decentralised.
What does that mean?
It means that there’s no central bank determining the price of USD, EUR, GBP and NGN.
The price of each currency is set by supply and demand. This way you can educate yourself to predict possible increase or decrease in supply and demand of say USD and NGN and invest in this currency pair accordingly.
Crypto
In 2010 crypto was an emerging market.
It’s no surprise how much it’s grown since then. With endless crypto options from Bitcoin to Ethereum and Litecoin, specialists speculate that crypto is a market that’s only going to grow more.
Is it too late to invest in crypto? Has the gold rush era of crypto been long gone?
It certainly has evolved and there’s time to learn how to invest in it and make profit. Fortunately, there is an array of online resources you can learn about how crypto trading works and get better at it.
Stocks
It’s no coincidence that the good old stock market has been there for over a century.
Unlike crypto which has been around a decade, the stock markets have been longer, meaning that the odds are it’s not going to go anywhere for the next few decades.
Has it evolved since the emergence of new more appealing markets?
Absolutely, but it’s still a popular option not only among Nigerians but for investors from around the world. The other good thing with stock markets is that there’s a lot of historical data that you can use to your advantage.
If you learn how to analyse data and draw conclusions (a truly valuable skill to become a successful investor), you’ll be able to make more accurate predictions of the stock market’s trajectory.
Indices
Investing in indices isn’t as complicated as it sounds.
Indices or investment funds is when your funds follow a benchmark index including Nasdaq 100, Russell 2000 Index, the Wilshire 5000 Total Market Index and S&P 500. What happens is your funds are spread throughout all the stocks the index invests in. This way your investment becomes less risky since it’s diversified.
Commodities
This is another popular market for trading among beginners in Nigeria.
How does that work?
By ‘commodities’ we refer to gold, oil and silver. You can invest in commodities in various ways. A common one is to buy physical products including gold bars. Another method is to invest in shares of oil or silver companies.
Let’s have a glance at the most popular commodities to invest in:
· Precious metals (gold, silver, platinum)
· Oil
· Natural gas
· Wheat
· Corn
· Cattle
· Soybeans
· Lumber
· Hogs
What factors have an effect on commodity prices?
There are many factors that affect the price of commodities including natural disasters, the global economy and of course, the supply and demand.
It’s wise to stay up to date with current affairs to be able to make predictions on the price changes of commodities.
How to get better as a trader
Are you a rookie or experienced trader?
Either way, you need to develop a bunch of key skills to maximise your chances of making profit with your investments.
Let’s go over them one by one.
Never stop educating yourself
The world of trading is dynamic and never stops evolving.
If you really want to stay on top of your game and become a successful trader, it’s wise to constantly educate yourself. New trading terms emerge over time you should know, new markets appear on the scene like crypto and change the game, while top investors come up with innovative strategies to scoop up huge profit.
Your goal should be to quickly learn about the changes, trends and strategies that are going to give you the edge.
Strategy vs. tactics
You can go either tactics or strategy.
Let us explain:
There are investors in Nigeria and all over the world that play the long-term game, meaning that they invest in a market (say for example Bitcoin) and keep their investment for years (or even a decade) as they believe that the price of their investment is going to go up throughout this timeframe.
There are also those traders that (for whatever reason) don’t think long term and invest in markets during recessions (when prices are low) and sell when the economy recovers and usually walk away with a profit.
Which category do you belong to?
The downside of playing the long-term game is that you typically need a huge amount of capital whereas the short-term approach suits those with a small amount of money to invest at the start. However, playing the long-term game often yields higher profit while the short term brings in smaller amounts.
Whichever suits you better, it’s a good idea to become familiar with online trading.
Become familiar with online trading
We’re about to unveil the best way of going beyond becoming familiar with online trading.
This is by simply creating a demo account and making trades with fake money. This stimulation is going to really help you get a depth of practical knowledge on how markets work. For example, you’ll learn what a bear and bull run are, you’ll get better at assessing risk, speculating profit or losses and distinguish a bad forex pair from a good pair. And on top of all it’s good fun to create a demo account.
What’s better than learning to trade without spending a dime out of your money?
OK, now you exhausted all your credits from your demo account. What’s next?
It’s time you set up a real account and start with your first investment.
Get better at decision making
A large part of getting the hang of trading is getting better at decision making.
More specifically, you should be able to analyse a market’s data of the past and draw conclusions that will help you make profitable investments.
Many traders (especially newbies) fall into the trap of making investments based on their emotions. For example, someone who likes Apple products and owns an iPhone assumes that purchasing Apple shares is always going to be a good investment. The reality is, much like any other stock and market, Apple’s shares have fluctuations, meaning that if you buy shares when its value starts going down you’ll lose money.
That’s why it’s critical to be able to analyse historical data.
It will maximise your chances of succeeding with your investments.
Choose a reputable broker
We can’t stretch the importance of finding a reputable broker enough.
There are plenty of options in the Nigerian market to pick from.
The trouble is:
Not all of them are reliable. In fact, many of them are scammers or often overpromise and underdeliver.
How can you spot them?
Everything from licence to media mentions are crucial here, so we recommend you check the most vital factors first, and then browse online reviews – they will help you get a clear picture. Meanwhile, we can offer you three brokers to consider.
Exness
By serving over 150 different countries, it’s no surprise Exness is one of the most reputable brokers out there. It is licenced by CySEC (Cyprus), FCA (UK), FSA (Seychelles), FSC (BVI), CBCS (Curacao), FSCA (South Africa) and CMA (Kenya). It’s fairly easy to trade with Exness since they offer technical support in 15 languages.
EGM Securities
EGM Securities is another option with different products including forex, ETFs, shares, indices, commodities and futures as CFD Spots and Future contracts. You can create your account by filling out a form and sending a copy of your identity and proof of address. Once the check is valid they will open your account.
Scope Markets
This is another option for the Nigerian market offering products like crypto, stocks, forex, metals indices. They have an easy-to-navigate online platform that has an education tab where you can read ebooks to expand your knowledge on online trading. Scope markets offer support to their customers via email.