Every day, the Forex market sees volume of trading of over $6.6 trillion worldwide. In Africa, retail forex trading is expanding, and although there is not a lot of trading, there are reportedly over a million young retail traders and their trading volume is rising daily.
Uganda is one of the nations where retail traders' online FX trading is expanding. The main danger associated with this growth for retail traders is that of losses.
Uganda's economy is expanding quickly, providing the ideal environment for investors to show a great interest in forex trade operations. Trading Ugandan Shillings (UGX) for foreign currencies that are rising in value is a common way for many people to increase their wealth.
Unfortunately, many consumers rely on offshore brokers to trade forex because there aren't any forex brokers in Uganda.
Ugandan Currency
Uganda's currency has changed over the years. Tanganyika, Kenya, and Uganda initially used Indian rupees (INR). The East African Rupee succeeded the Indian Rupee in 1906, and the East African florin in 1920.
After a year, the East African Currency Board introduced the East African Shilling. The first Ugandan shilling was recognized as legal money in 1966.
Uganda Forex Bureau and Money Remittance Association (UFBMRA) was created in 2001 by the Bank of Uganda Governor.
Quick guide to forex trading in Uganda
Trading in forex holds many dangers for foreign investors. A few factors to be aware of is:
#1 - Forex trading is not regulated in Uganda.
Uganda's Capital Markets Authority (CMA) encourages and oversees the development of the capital market through licensing stock brokers, investment advisers, and fund managers.
According to the list of licensed firms, the CMA has not yet awarded a license to any forex broker. The lack of government regulation does not render forex trading unlawful, and it is now permissible to trade forex with foreign CFD brokers in Uganda. Due to the lack of regulation, retail Forex traders prefer to open accounts with overseas forex and CFD brokers licensed and regulated in other countries, primarily in Europe.
#2 – Retail traders lose money
Due to the fact that forex trading requires accurate predictions of currency price fluctuations and can involve the use of leverage, many traders incur losses. Ugandan Forex Brokers do not advise traders about these risks.
#3 - No restrictions on leverage
Leverage in forex trading refers to the ability to take a trading position that is worth more than the money in your trading account.
Due to a lack of regulation in Uganda, some brokers offer leverage of up to 1:2000 because it benefits them personally, as you must pay interest on the loan whether you make a profit or not, in addition to the risk you are taking. Trading using leverage exposes you to a larger stake but also magnifies your losses.
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#4 – Forex trading in Uganda can be expensive
If you need $5 to initiate a transaction, it equals 17,919 UGX (Ugandan Shillings). A large trading balance may be too much for most traders given exchange rates.
Most brokers in Uganda don't offer local bank transfers, therefore you may have to pay extra for payment options.
The Volatility 75 Index (VIX) measures the S&P500's volatility. If VIX is above 30, the market is fearful. There is no VIX 75 forex brokers in Uganda.
#5 - Forex brokers don’t have to offer Negative Balance Protection
Negative balance protection prevents you from losing more than your trading account holds. If the market moves against you, you won't owe your broker. Forex brokers that welcome Ugandan traders are not required to offer Negative Balance Protection.
#6 - You could lose all your Capital
Forex trading is dangerous and you could lose all your money. Market understanding is crucial. Use a regulated broker. This is important because Uganda's trade is unregulated.
Invest just what you can afford to lose. The amount you can lose without being affected. Trading requires patience and discipline.
Also Read: How new law on forex trading affects transactions in foreign currencies