Short answer
Forex trading is buying one currency while selling another, in the hope that the exchange rate moves your way. Most beginners in Nigeria, Kenya and South Africa trade it through an online broker as CFDs, so they never hold the currency itself. Leverage makes both gains and losses much larger than the deposit suggests.
How to read a currency pair
Live chart: EURUSD
On this page
What is forex, and what is forex trading?
Forex, short for foreign exchange (also written FX), is the market where currencies are exchanged for one another. Banks, companies, central banks and investment funds trade it around the clock on weekdays. The Bank for International Settlements measured average turnover of USD 9.6 trillion a day in April 2025 (BIS).
When people in Lagos, Nairobi or Johannesburg talk about “forex trading”, they usually mean something narrower: using an online broker’s app or platform to speculate on whether one currency will rise or fall against another. You don’t receive or deliver any currency. You open a position, the price moves, and you close it with a gain or a loss.
How a currency pair works
Currencies are always priced in pairs. In a quote such as EURUSD 1.1000 (an example price), EUR is the base currency and USD is the quote currency. The price tells you that one euro costs 1.10 US dollars.
- Buy (go long) if you expect the base currency to strengthen against the quote currency.
- Sell (go short) if you expect it to weaken. You can sell first without owning anything; you buy back later to close.
Suppose you buy 0.10 lots of EURUSD at 1.1000. On EURUSD, 0.10 lots is worth USD 1 for every pip the price moves. These are example numbers, not a trade idea:
| Price when you close | Move | Result on 0.10 lots, before costs |
|---|---|---|
| 1.1050 | 50 pips in your favour | Gain of USD 50 |
| 1.0950 | 50 pips against you | Loss of USD 50 |
The two numbers that decide the result are the size of the move, measured in pips, and the size of your position, measured in lots.
The pairs you’ll see on a platform
- Majors all include the US dollar: EURUSD, GBPUSD, USDJPY, USDCHF, AUDUSD, NZDUSD and USDCAD. They tend to have the lowest spreads.
- Crosses pair two currencies without the dollar, such as EURGBP or GBPJPY.
- Exotics pair a major currency with the currency of a smaller economy, such as USDZAR. Their spreads tend to be wider. Check your broker’s symbol list to see whether pairs with the rand, naira or shilling are offered at all.
- Gold (XAUUSD) sits on the same platforms and works in a similar way. See what XAUUSD is.
Your trading account is usually held in US dollars, so gains and losses are counted in dollars even when you deposit naira, shillings or rand.
Who you trade with: the broker
Individual traders can’t trade on the interbank market directly. A broker gives you a platform (such as MetaTrader 5 or its own app), quotes buy and sell prices, holds your deposit and carries out your orders.
Most retail forex in Africa is traded as CFDs (contracts for difference). A CFD is an agreement with the broker to settle the difference between the opening and closing price. You never own the currency, which is why you can sell as easily as you buy.
Which company holds your account decides who, if anyone, supervises it:
- Kenya: the Capital Markets Authority licenses non-dealing online forex brokers and publishes a register of licensees you can search.
- South Africa: the FSCA authorises financial services providers; check a broker’s FSP number on the FSCA’s register before you deposit.
- Nigeria: the SEC published proposed rules on online forex and CFD trading in September 2026. They are not final.
Our country guides for Nigeria, Kenya and South Africa go into more detail, and how to choose a forex broker lists what to check.
What forex trading costs
- Spread: the gap between the buy and sell price. You pay it on every trade.
- Commission: charged per lot on some account types, in exchange for tighter spreads.
- Swap: an overnight charge or credit on positions held past the daily rollover.
- Currency conversion: when you fund a dollar account in naira, shillings or rand, the exchange rate you get is part of your cost.
You pay these costs whether a trade wins or loses, so they matter more the more often you trade.
When you can trade
The forex market runs 24 hours a day from Monday to Friday, passing from Sydney to Tokyo to London to New York. It is busiest when London and New York are both open, which falls in the afternoon in West Africa and the late afternoon or early evening in South and East Africa. Our forex trading hours page gives the times in WAT, SAST and EAT.
Forex trading isn’t the same as changing money
In Nigeria, “forex” also means buying dollars from a bank or bureau de change. That is currency exchange: you hand over naira and receive dollars. Forex trading on a platform is speculation on price changes, usually with leverage, and its result depends on the pair you trade and the direction you choose, not on whether the naira is weak.
Be wary of “forex investment” offers that promise a fixed weekly or monthly return on money you send to someone who will “trade for you”. Real trading results go up and down, and no honest trader can promise a fixed return. Never send money to a person’s private account so they can trade on your behalf.
The risks, plainly
- Leverage lets you control a position far larger than your deposit. A small move against you can use up your whole balance. Read leverage and margin before you trade.
- Prices can jump over weekends and around news, and a stop loss can be filled at a worse price than you set.
- Nobody can reliably predict short-term price moves. Be sceptical of anyone selling signals; in South Africa the FSCA treats publishing trading signals as a financial service that needs a licence.
- Broker risk: an unregulated company may be hard to recover money from if something goes wrong.
Only trade with money you can afford to lose, and learn the mechanics on a demo account before you use real money.
Where to go next
- How to start forex trading: a step-by-step plan.
- What is a pip? and what is a lot?: the two units behind every result.
- Leverage and margin: why small accounts get wiped out.
- Forex demo account: practise without risking your own money.
Common questions
How does forex trading work for beginners?
You open an account with a broker, choose a currency pair such as EURUSD, and buy if you expect the first currency to rise against the second or sell if you expect it to fall. When you close the position, the difference in price, multiplied by your position size, is your gain or loss, minus costs such as the spread.
What is a forex trader?
Anyone who buys and sells currencies to gain from price changes. That includes bank dealers and funds, and individuals who trade small amounts through an online broker. Being a forex trader is not a qualification, and nobody needs a certificate to open a retail account.
Is forex trading legal in Nigeria?
We found no Nigerian licensing regime currently in force for online forex and CFD brokers. In September 2026 the SEC published proposed rules that would cover offshore brokers serving Nigerians; they are not final. Our Nigeria page tracks this. This is a description, not legal advice.
Can I start forex trading with small money?
Some brokers accept very small first deposits, and cent accounts let you trade tiny sizes. A small balance does not make trading safer, though: with high leverage it can be lost in a few trades. Practise on a demo account first, and only deposit money you can afford to lose.
What is forex trading in gold?
Gold is traded on the same platforms as currencies under the symbol XAUUSD, the price of one ounce of gold in US dollars. It works like a currency pair, but one standard lot is usually 100 ounces rather than 100,000 units of currency.