You’ve probably come across all those forex traders on TikTok bragging about how much money they make. Now you are wondering; how much money can you really make from Forex trading in Kenya? 

I get it. 

The flashy cars and parties can really put you in a FOMO spot. But the truth is, Forex trading in Kenya is not everything you see on TikTok. It’s risky and you can lose money. 

However, it is also possible to make money through forex trading if you employ the right strategies. 

But exactly how much can you make? Let’s find out. 

How Much Can You Earn From Forex Trading in Kenya?

You can make a few hundred shillings to millions through Forex trading in Kenya. Unfortunately, there is not a standard figure I can give you. The amount you make will vary depending on factors such as your skill level, risk appetite, market conditions, the amount of money you invest, and your trading strategy. 

There are many people making money through Forex trading in Kenya. There are also people losing money. At the end of the day, all or some of these factors will inform how much you can make. 

On top of these factors, there are two things that will also likely affect how much money you make through forex trading in Kenya. These two should be part of your trading strategy but since they are very important, I wanted to discuss them separately. 

I am talking about: 

• Win rate 
• Risk/reward ratio

Win Rate 

Win rate refers to the percentage of winning trades out of the total number of trades you execute. It measures the accuracy of your trading strategy and indicates how often your trades result in profits. A higher win rate implies a greater proportion of winning trades, while a lower win rate suggests more losing trades.

For example, let’s assume you execute 100 trades in a month, with 60 trades resulting in profits and 40 trades in losses. You will calculate the win rate as follows:

Win Rate = (Number of Winning Trades / Total Number of Trades) x 100 Win Rate = (60 / 100) x 100 = 60%

In this scenario, you have a win rate of 60% which means you are making a little profit. Generally, to make a profit, your win rate should be more than 50%. Most traders recommend targeting between 50% to 70% win rate. 

However, a high win rate doesn’t always guarantee profitability. 

How Win Rate Affects Earnings

While having a high win rate may seem desirable, it does not guarantee profitability on its own. You will also need to consider the Risk/Reward ratio and the overall profitability of winning trades.

A trader with a high win rate but small average profits compared to average losses may still experience overall losses. Conversely, a trader with a lower win rate but larger average profits compared to average losses can be profitable.

To assess the impact of win rate on earnings, let’s consider two traders:

Trader A has a win rate of 70% and an average profit per trade of 20 pips. Trader B has a win rate of 40% and an average profit per trade of 50 pips.

Trader A:

• Total Trades: 100 
• Winning Trades: 70 
• Losing Trades: 30 
• Average Profit: 20 pips 
• Average Loss: 30 pips

Profit from Winning Trades = (Winning Trades x Average Profit) = (70 x 20) = 1,400 pips 

Loss from Losing Trades = (Losing Trades x Average Loss) = (30 x 30) = 900 pips

Net Profit = Profit from Winning Trades – Loss from Losing Trades = 1,400 – 900 = 500 pips

Trader B: 

• Total Trades: 100 
• Winning Trades: 40
• Losing Trades: 60 
• Average Profit: 50 pips 
• Average Loss: 20 pips

Profit from Winning Trades = (Winning Trades x Average Profit) = (40 x 50) = 2,000 pips Loss from Losing Trades = (Losing Trades x Average Loss) = (60 x 20) = 1,200 pips

Net Profit = Profit from Winning Trades – Loss from Losing Trades = 2,000 – 1,200 = 800 pips

In this example, even though Trader A has a higher win rate, Trader B generates higher overall profits due to a more favorable Risk/Reward ratio.

So, what exactly is a Risk/Reward ratio?

Risk/Reward Ratio

The Risk/Reward ratio measures the potential profit (reward) relative to the potential loss (risk) on a trade. It helps traders assess the potential return they can expect for every unit of risk undertaken.

For example, if you place a stop-loss order 50 pips away from the entry point and set a take-profit order 100 pips away, the Risk/Reward ratio would be 1:2. This means that for every pip you risk, you aim to make a profit of two pips.

How Risk/Reward Ratio Affects Earnings

A favorable Risk/Reward ratio allows you to generate profits even with a lower win rate. Let’s consider two scenarios to illustrate this:

Scenario 1: 

Trader A has a win rate of 50% and a Risk/Reward ratio of 1:2. 

• Total Trades: 100 
• Winning Trades: 50 
• Losing Trades: 50 
• Average Profit: 100 pips 
• Average Loss: 50 pips

Profit from Winning Trades = (Winning Trades x Average Profit) = (50 x 100) = 5,000 pips 

Loss from Losing Trades = (Losing Trades x Average Loss) = (50 x 50) = 2,500 pips

Net Profit = Profit from Winning Trades – Loss from Losing Trades = 5,000 – 2,500 = 2,500 pips

Scenario 2: 

Trader B has a win rate of 70% and a Risk/Reward ratio of 1:1. 

• Total Trades: 100 
• Winning Trades: 70 
• Losing Trades: 30 
• Average Profit: 50 pips 
• Average Loss: 50 pips

Profit from Winning Trades = (Winning Trades x Average Profit) = (70 x 50) = 3,500 pips 

Loss from Losing Trades = (Losing Trades x Average Loss) = (30 x 50) = 1,500 pips

Net Profit = Profit from Winning Trades – Loss from Losing Trades = 3,500 – 1,500 = 2,000 pips

In this example, even though Trader B has a higher win rate, Trader A generates higher overall profits due to a more favorable Risk/Reward ratio.

By maintaining a positive Risk/Reward ratio, you can ensure that your winning trades generate more significant profits than their losing trades, leading to overall profitability.

Ultimately, both win rate and Risk/Reward ratio are crucial factors in determining how much money you make through forex trading in Kenya. 

While a high win rate provides a higher proportion of winning trades, a favorable Risk/Reward ratio ensures that profitable trades generate more significant gains than losses. That said, you should aim to strike a balance between these two factors to achieve consistent profitability in forex trading.

Now, let’s look at more factors that will affect how much you make. 

8 Factors That Can Influence Your Earnings in Forex Trading in Kenya

• Trading strategy 
• Capital 
• Risk management
• Market conditions 
• Trading skills and experience 
• Psychological factors 
• Brokers 
• Economic and political factors 

1. Trading Strategy

A trading strategy is a set of rules and guidelines that traders follow to make trading decisions. To make money, you will need a  well-developed and tested strategy. The trading strategy defines the entry and exit points, risk management rules, and criteria for analyzing market conditions.

 It should help you identify potential trading opportunities based on technical indicators, chart patterns, or fundamental analysis.

To develop a robust trading strategy, you need to consider your trading style, risk tolerance, and time commitment.  You should also backtest the strategy using historical data to assess its performance and make necessary adjustments. 

I cannot guarantee that your strategy will make you money in all market conditions. However, a well-executed strategy can increase the probability of success.

2. Capital

Traders with a  larger capital base can take larger trading positions, potentially resulting in higher profits. However, you should only trade within your financial means and avoid excessive risk-taking. 

Risking too much capital on a single trade can lead to substantial losses, especially in volatile market conditions.

Additionally, you should diversify your capital across different currency pairs and avoid putting all your funds into a single trade. Diversification helps spread the risk and reduces the impact of losses on the overall trading account. 

3. Risk Management

In order to protect your capital and minimize losses in forex trading, you will need an effective risk management strategy. In simple terms, risk management involves implementing strategies and techniques to control and limit the amount of capital at risk in each trade. 

The most common of these strategies are:

• Stop-loss orders – Use stop-loss orders to automatically exit a trade if it moves against your position beyond a predetermined level.
• Take-profit orders – Use ake-profit orders to secure profits by closing a trade when the price reaches a specified target. 
• Position sizing – This strategy determines the appropriate lot size or trade volume based on your risk tolerance and the distance to the stop-loss level. 

On top of implementing these strategies, you should avoid risking a substantial portion of your capital on a single trade and consider the potential loss in relation to your account size.

Furthermore, you should practice emotional discipline which is very crucial in risk management. This means that you should avoid making impulsive decisions based on fear or greed, stick to your trading plan, and avoid revenge trading after experiencing losses.

4. Market Conditions

Market conditions, such as volatility and liquidity, can significantly impact how much money you make with forex trading. Volatility refers to the magnitude of price fluctuations in the market. 

Higher volatility can present both opportunities and risks. During periods of high volatility, currency prices can move rapidly, offering more trading opportunities. However, it also increases the likelihood of sudden price reversals and larger losses if risk management is not properly implemented.

Liquidity refers to the ease of executing trades without significantly affecting the currency’s price. Highly liquid currency pairs are more desirable for forex trading because they allow for quicker trade execution and tighter bid-ask spreads. In illiquid markets, trading can be more challenging, as it may be difficult to enter or exit positions at desired price levels.

Traders should adapt their trading strategies to different market conditions. For example, in high volatility, shorter-term trading strategies like day trading or scalping may be more appropriate, while in low volatility, longer-term strategies like swing trading or position trading may be favored.

So, if you want to understand and anticipate market conditions, you need to stay informed about economic events, news releases, and market sentiment. Important economic indicators, such as interest rate decisions, GDP reports, and employment data, can significantly impact currency prices and how much you make. 

5. Trading Skills and Experience

Developing trading skills and gaining experience is a continual process in forex trading. Knowledge of technical analysis, fundamental analysis, and risk management techniques is essential for making informed trading decisions. 

You should be able to understand various chart patterns, indicators, and tools to analyze price movements and identify potential entry and exit points.

Experience also plays a crucial role in enhancing trading skills. With practice, you can develop a better understanding of market dynamics, improve your timing in trade execution, and gain insights into effective risk management.

I always recommend that you start with a demo account to practice trading strategies and gain familiarity with the trading platform before transitioning to live trading.

More importantly, never stop learning. Continuous learning is vital for staying updated with market trends and evolving trading techniques. There are several ways to stay updated. 

You can attend webinars, read books, follow reputable financial websites, and engage in trading communities to expand your knowledge and learn from experienced traders.

6. Psychological Factors

Emotions such as fear, greed, impatience, and overconfidence can lead to poor decision-making and impulsive trading actions that can make you lose money. In fact, your emotional attachment to trading can directly affect how much money you make. 

To make more money, you need to control these emotions and maintain discipline. 

What’s more, developing a trading plan and following it consistently can help you manage emotions and reduce the influence of impulsive decisions. A trading plan outlines the rules for entering and exiting trades, risk management guidelines, and strategies for different market conditions.

Therefore, having a predefined plan can help you avoid making emotional decisions based on short-term market fluctuations.

On top of that, you should avoid overtrading, which refers to excessive trading beyond your trading plan or risk management rules. Overtrading often stems from the desire to make quick profits but can result in increased transaction costs and potential losses. 

Most importantly, you need to maintain a positive mindset, even during periods of losses. Accepting that losses are part of trading and focusing on long-term profitability can help you overcome psychological hurdles. You can start by reviewing past trades, identifying mistakes, and learning from them, rather than dwelling on the negative outcomes.

7. Broker Selection

The choice of a reliable and reputable forex broker can impact your earnings and overall trading experience. It’s important to consider factors such as the broker’s regulation, trading platform, transaction costs, customer support, and available trading instruments.

Regulation ensures that the broker operates within specific guidelines and provides a certain level of client protection. Therefore, make sure that you work with a broker that is regulated by the Capital Markets Authority (CMA) of Kenya. A regulated broker can provide a more secure trading environment to help you make more money from Forex. 

Ideally, the trading platform should be user-friendly, stable, and offer essential features for technical analysis. Ensure that the platform provides access to the currency pairs and trading instruments you wish to trade. Also, consider the execution speed and order types available to facilitate efficient trading.

Transaction costs, including spreads, commissions, and overnight swap rates, can affect your profitability. Compare the fee structures of different brokers to find a balance between competitive pricing and quality of service.

Lastly, customer support is crucial, especially for beginners or traders who may encounter technical issues. You need a  responsive and helpful customer support team that can assist with account-related queries and technical difficulties, ensuring a smooth trading experience.

8. Economic and Political Factors

Economic and political events usually impact currency prices. Factors such as interest rate decisions, geopolitical tensions, economic indicators, and government policies can create volatility and trading opportunities.

You should, therefore, monitor economic calendars, and stay informed about upcoming events. Keep tabs on economic indicators, such as inflation rates, employment data, and GDP reports, to get insights into the country’s economic health since these indicators can potentially impact its currency value.

Political events, such as elections or policy changes, can also have a significant impact on currency markets, impacting how much money you can make.  I am talking about things like changes in leadership, trade agreements, or geopolitical tensions that can create market uncertainty and affect currency prices. 

So, make sure that you stay updated on the latest news and analyze the potential implications of political developments on currency movements.

The Bottom Line 

Forex trading is a dynamic field, and staying ahead requires continuous learning and adaptation. Markets evolve, new trading strategies emerge, and technological advancements impact trading practices.

Continuously educating yourself about forex trading through books, online courses, webinars, and seminars is important to expand your knowledge and skills. Stay updated with market trends, explore different trading techniques, and analyze the performance of your trading strategies.

Also, being able to adapt can help you align your trading approach with changing market conditions. A strategy that worked in the past may not be as effective in current market circumstances. Therefore, ensure that you regularly evaluate and refine your trading strategies to ensure they remain relevant and effective.

I also recommend networking and engaging with other traders to get valuable insights and perspectives. Join trading communities, participate in forums, and share experiences with fellow traders to learn from their successes and failures.

Remember, forex trading is a continuous learning journey, and being adaptable and open to new ideas can help improve your performance and profitability over time.