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Inside Kenya’s youth-fuelled forex trading boom
William Abagi, an independent trader; Sylvia Muchai, founder of Sylvia’s Traders Lounge; and Mark Muiru, founder of TradersKe, are part of a new wave of youth driving online trading and financial literacy.
Sylvia Muchai first opened an online trading account in 2014, but within a week, her first deposit of $250 (about Sh32,325 at the current exchange rate) was gone.
She had effectively ‘blown up an account’ within days, as professional traders would say it.
“I did not know what I was doing,” she tells BDLife.
This was before the advent of trading academies, so she had a lot of ‘self-teaching’ to do.
“I took up a self-taught path on Babypips (a free educational website teaching beginners how to trade foreign currencies and crypto), then found mentors who would discuss weekly market analysis on Skype,” she says.
Today, Sylvia describes herself as a swing trader, holding positions for days and sometimes for weeks before executing new actions to buy or sell.
In 2017, Sylvia stepped up from being a novice trader to founding Sylvia’s Traders Lounge, a YouTube channel that featured market wizards on their trading journey and now hosts live trading sessions.
Mark Muiru, like Sylvia, also began trading as a novice in 2021 and has since grown, founding his own platform, TradersKe, an online community dedicated to financial literacy.
His journey began with an all too familiar setback; getting scammed.
“I was referred to trading by my auntie. She has a business abroad, and she called me asking if I had heard about forex trading. ‘I have a client of mine that I attend to, and I think he does trade, and it has gone well for him. He is a young man looking for opportunities, and so are you. You should give it a try.’”
Mark’s auntie offered to pay for his first two classes, but they were scammed.
“You learn through pain, more so in this industry. I am not the only victim who has been out there,” he says, adding, “you just can’t go into something for one week and acquire enough knowledge. It’s a constant learning journey. Besides scammers, you also have brokerages that are as scrupulous as they are in it to earn money without care for retaining clients.”
One-year break
William Abagi is another young trader whose journey began with an interest in global financial news. He has the internet and the proliferation of mobile trading platforms to thank for his journey into trading.
He, too, has been a victim of scams, which forced a break early on to learn the ropes, returning well-equipped to take on the market highs and lows.
“I took a break for a whole year just to seek out the truth. People come into trading hoping to make some money and make a living out of it, but expectations must be managed as well; it’s just like any other business,” he says.
“If you were to open a butchery tomorrow, you wouldn’t be certain of success, but some expect to come to trading and double their money overnight. That’s how you get scammed. The narrative being pushed out there is that you can make 10x your investment in a very short period. Traders need to understand what’s going on...understand the nuances of the market, and they can come out of it profitable.”
Sylvia, Mark and William dedicate part of their free time to educating other youth on financial and trading literacy with the aim of shortening their journeys and cultivating a knowledgeable investor base within Kenya’s capital markets.
Four to five percent of Kenyans
Having begun largely with foreign currency pairs, the term forex trading has gained wide acceptance even as cryptocurrencies, commodities and stablecoins enter the trading zeitgeist.
The number of Kenyans involved in trading is yet to be defined, but Fidel Castro, the Head of Sales at Empire FX, a licensed dealing online foreign exchange broker, says about four to five per cent of Kenyans aged 18 to 45 have tried their hand at trading.
From the 2019 national population census by the Kenya National Bureau of Statistics (KNBS), this means between 7.6 and 9.6 million Kenyans in the age group are traders.
A source at the Capital Markets Authority (CMA), which regulates players in the sector, says the estimate on the number of traders is ‘credible’.
The trading bias towards a mostly youthful population has been attributed to the age group’s ability to take on risks, where the younger the trader, the more risks they are likely to take.
“Younger traders don’t care what happens and are more of the risk-takers. Older traders handle money more carefully as they have bills to pay and all that. A younger person is likely still living with their parents at home and getting more support and pocket money,” Mr Castro says.
“Incidentally, younger traders are more knowledgeable, having had access to newer technologies, including early exposure to smartphones.”
How they earn money
Dealing online foreign exchange brokers earn their revenues from spreads and not commissions as they offer two-way quotes to traders (market making), earning money from the difference.
Most licensed brokers are, however, non-dealing, implying they earn revenues from commissions.
Most traders will ‘blow up their accounts’/lose money with specific brokers, placing these losses as high as 94 percent.
Brokers still make money from these trades, nonetheless.
Despite the guarantee, brokers are pushing to educate traders, noting the risk of losing clients when the loss-making traders quit completely.
The players also must confront an ugly truth-widespread scams, especially on the internet.
Flashy personalities posing as successful traders on social media have allegedly made a killing from ‘misleading’ novice traders with the promise of leading similar lives as their own, accented by luxury vehicles, loads of cash and flagship smartphones.
Some of the scams are alleged to involve the selling of wrong signals, usually actionable real-time alerts or recommendations, often sent via text messages.
The alleged scammers will mostly take positions opposite those in the signals sent, taking profits away from their supposed clients.
Flashy scammers
Mr Castro, who advises individuals to only deal with licensed players, warns that the flashy ‘scammers’ are too easy to fall for, especially for unsuspecting Kenyans.
“Traders are just humans like any of us and will believe in what they see. For instance, if you walk into a gym for the very first time, you will likely choose the muscled trainer over one with a pot belly,” Mr Casto notes.
The Capital Markets Authority (CMA) offers three categories of licences for foreign exchange brokers, including the non-dealing online foreign exchange category, the online foreign exchange money manager and the dealing online foreign exchange.
The CMA has licensed 13 non-dealing foreign exchange brokers, including FX Pesa, Scope Markets, HF Markets and Pepperstone Markets.
Three players are online foreign exchange money managers, including Standard Investment Bank’s Mansa-X product, Trade Sense and Store Poa Enterprise.
Empire FX Trade Limited and CC Kenya Securities, which trades as Capital.com are the only dealing online foreign exchange brokers.
New entrants
New market entrants are angling to get licences from the CMA as they expand operations in Kenya.
“We entered the African market in September last year, and there are a lot of other players expanding here. I think it has to do with the youthful population, which is larger than anywhere else. That’s why everyone is coming to Africa,” says Thomas Kyalo, the head of operations at Xelans Markets.
“People prefer dealing with a regulated entity, so down the line, it will help a lot to be a licensed player. We are working on that currently.”
The CMA did not confirm the pipeline of market players seeking its greenlight but noted it would disclose new market entrants as and when it receives and approves applications.
The market regulator, however, expressed worry that some players could be operating in the country without requisite approvals by leveraging partnerships with other local and global players.
Despite the pitfalls involved, youth like Sylvia see trading as any other profession and highlight upskilling and adopting risk management to thrive in the space.
“Trading is like any other profession or business. One must ensure that they have the right foundation by getting the skills and applying proper risk management tools to thrive in this career path,” she says.
“I have friends and networks in my circle who are full-time traders and make a good living out of trading.”
