The rapid rise in popularity of online prop trading has been turning heads in recent years. Prop firms give traders from all over the world the necessary opportunities to gain funding and improve their financial standing, primarily through the forex market.
After passing the evaluation phases, prop traders can access tens of thousands of dollars in trading capital, which greatly boosts their buying power and gives them the ability to generate high sums of profit.
Kenya, which has been one of the fastest growing economies in Africa, is a popular destination for prop firms, as there are hundreds of thousands of potential traders in the country.
To understand how the prop trading market works and how Kenyan traders can take advantage of it, we must first understand what prop trading is, what the regulatory framework in Kenya is like, and what traders can access using prop trading firms in the country.
Prop trading is a relatively recent phenomenon which involves two parties:
Traders who sign up for a prop trading challenge can greatly boost their buying power as long as they comply with the rules set out by the firm and successfully pass the evaluation stages.
In some cases, prop firms offer instant funding accounts, although they tend to offer stricter terms due to the lack of challenge phases.
In general, traders in Kenya have access to some of the most well-established prop firms with years of experience and a variety of tradable instruments on offer.
When it comes to the prop trading practice as a whole, it is subject to little to no regulations globally. The reason behind this is rather simple – prop firms do not deal in securities, as opposed to brokerage firms.
Prop firms simply provide the funding to successful traders and recuperate their funds over time through account fees and a cut of the trader’s profits.
Typically, prop firms will retain between 10-20% of the profits generated by their client traders, while charging account fees that constitute a very small percentage of the buying power of the funded account.
Due to a lax regulatory environment, traders in Kenya can access prop firms from all over the globe – giving traders plenty of choices when it comes to the instruments they would like to trade and the funding structures that best suit their financial objectives.
When comparing prop firms with forex brokerages, the difference is quite stark. Forex brokers are obligated to obtain valid licenses and comply with a host of regulations, such as the minimum paid-in capital required to even register as a securities broker, coupled with recurring transparency and reporting requirements.
The Capital Markets Authority of Kenya is the primary regulatory body overseeing brokerage firms and financial markets in the country.
Forex brokers who wish to operate in Kenya need to maintain 50 million shillings in capital, which is equivalent to USD 400,000.
In addition to this, brokers are required to file financial statements to the CMA and report any significant changes in the corporate structure, management and the shareholders of the firm.
Conversely, prop firms are not subject to such regulations, as they do not hold clients’ assets on their accounts. For forex brokers, keeping clients’ funds in segregated accounts is an essential rule and violation will result in revocation of the brokerage license issued by the CMA.
After choosing a specific prop firm to sign up with and start a funding challenge with, traders need to first pay the fee associated with that particular funding challenge.
There are numerous different payment options available to traders in Kenya, which includes credit card payments, online payment solutions and cryptocurrencies as well.
Visa and Mastercard credit cards are supported by virtually every prop trading firm available in Kenya. Therefore, traders who hold valid accounts under their name at major commercial banks in Kenya, such as Absa Bank, Kingdom Bank Ltd, KCB, etc. can easily pay for the funding challenge fee.
Any other fees associated with the payment should be consulted with the representatives of the bank.
M-Pesa is perhaps the most popular online payment company in Kenya and most prop firms accept alternative payment channels alongside credit cards.
However, it is important to check which specific payment methods are accepted at the prop firm of your choice in order to avoid any complications and loss of funds.
Paying the evaluation challenge fee using crypto is one of the most convenient and fastest ways to do so and many prop firms allow traders to pay using BTC or ETH.
Therefore, if the prop firm of your choice accepts crypto payments and you have a valid crypto wallet with sufficient funds, you can quickly and securely make the payment and start the funding challenge as soon as it is active on your prop trading account.
As we have already mentioned, prop trading is generally focused on forex. However, most prop firms also offer a range of other instruments as well, such as: commodities, indices, stocks, crypto, etc.
It is important to check the specific instruments listed on the official website of the prop firm you would like to trade with to choose the assets you are most comfortable with trading.
Currency trading is the most popular activity among prop traders. Major pairs, in particular, benefit from a very high level of liquidity, which makes it extremely easy for traders to enter and exit positions whenever they wish to do so.
It is worth noting that Kenyan traders are unlikely to find many local currencies on prop firms, as they typically focus on the most liquid instruments possible.
In general, most prop firms will offer at least 50 different pairs to choose from – giving traders plenty of room to experiment with different strategies while trying to beat funding challenges.
Commodities are perhaps the second most popular instruments on prop trading firms. Crude oil and gold are particularly popular, as they generally tend to move in higher pip values compared to major forex pairs, which gives traders more profitable opportunities to take advantage of.
The leverage on major commodities is typically 1:50, allowing traders to boost their buying power and make the most of profitable chart setups as they form.
The spreads on commodities trades tend to be higher than that of major currencies. However, this also means that dramatic rises and falls in price are also considerably more common.
Prop firms that do not offer individual stocks to their clients tend to make up for this shortcoming using indices.
Major stock indices, such as the S&P 500, the Nasdaq 100 and the DAX-40 are some of the most common indices offered by prop firms.
Trading these indices allows traders to gain exposure to the stock market as well, which serves as an important tool for diversification in an uncertain market.
A rare offering among prop firms, stock trading is not often associated with funded prop accounts. However, there are some exceptions to this, as a handful of prop firms do offer over 100 individual stocks from some of the most successful companies in the United States, such as the likes of: Apple, Microsoft, Tesla. Amazon, Walmart, Coca-Cola, and more.
However, it is also worth noting that prop firms that focus on stocks do not tend to offer commodities and many other instruments to their clients, which can be a significant drawback for some.
Major cryptocurrencies, such as Bitcoin and Ethereum, are very popular among prop traders, as they give them the opportunity to profit from larger price movements.
Some prop firms may offer more than these two cryptocurrencies and may include Litecoin, XRP, or other coins with a high market capitalization as well.
Depending on their progress, traders can switch between forex and crypto to balance their trades, reach the required number of trades and beat the funding challenge more easily.
Yes. Prop trading in Kenya is legal and subject to limited regulation. Prop firms do not hold clients’ funds, which is why they are exempt from the regulations governing brokerage platforms.
This makes it easier for Kenyan traders to access a diverse range of prop firms from all over the world and choose the one with the best possible terms.
Traders who sign up at a prop firm in Kenya can trade forex pairs, commodities like oil, gas, gold and silver, equity indices, cryptocurrencies and, in some cases, stocks from the NYSE and Nasdaq as well.
The leverage allowed for each asset class may vary considerably, with currency pairs benefiting from the highest leverage.
The profitability of prop trading depends on the skills and knowledge of the trader, as well as the changing dynamics of the market. Numerous prop firms offer their services to Kenyan traders and, in some cases, traders can obtain funding in excess of $1 million.
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