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Day Trading in Cameroon

Written By

Christian Harris

Written By

Christian Harris

Christian is a seasoned journalist with decades of experience. He transitioned from tech journalism to finance to follow his interest in investing. He has been trading stocks, futures, forex, and cryptocurrencies for more than 5 years, becoming an eToro Popular Investor. With hands-on expertise across various assets, he offers valuable trading insights.

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Edited By

James Barra

Edited By

James Barra

James is an investment writer with a background in financial services. As a former management consultant, he has worked on major operational transformation programmes at prominent European banks. James authors, edits and fact-checks content for a series of investing websites.

» James Barra Profile Page

Fact Checked By

Michael MacKenzie

Fact Checked By

Michael MacKenzie

Michael is a writer and editor with over a decade in journalism and publishing. His niche lies in editing and fact-checking content in the financial services sector, with a focus on online brokers and trading platforms. Michael previously reported on politics and economics in the Middle East and edits books for established publishers.

» Michael MacKenzie Profile Page

Updated

Oct 9, 2024

Cameroon, the largest economy in the Central African Economic and Monetary Community (CEMAC), continues to recover from external economic shocks, creating a volatile trading environment.

With a population of over 29 million and a GDP of approximately $53 billion, Cameroon is a lower-middle-income economy where agriculture, oil, and manufacturing dominate.

The banking sector in Cameroon is relatively underdeveloped, with only about 15% of the population having access to formal banking services. This low penetration, coupled with a largely informal economy, presents unique challenges and opportunities for active traders.

New to day trading in Cameroon? This guide will get you started.

Quick Introduction

• The Central African Financial Market Supervisory Commission (COSUMAF) oversees the financial markets across six Central African countries, replacing the previous Cameroon-centric regulatory body. Day trading falls under COSUMAF’s general regulatory framework.
• The Cameroon Stock Exchange (CSE), known as the Douala Stock Exchange (DSX) until its rebranding, is relatively young compared to those in more developed economies. It exhibits low liquidity and CSE-listed stocks are not widely supported by brokers.
• Cameroon’s currency is the Central African franc (XAF), and six countries share it in the CEMAC. However, trading volumes may be lower than major currencies, potentially limiting trading opportunities.

What Is Day Trading?

Day trading involves buying and selling financial instruments like stocks, bonds, derivatives, and commodities through online platforms within a single trading day.

While forex trading in Cameroon and cryptocurrencies are popular among resident day traders, local assets such as shares of companies listed on the CSE and government bonds are also relevant.

However, due to the limited liquidity and fewer listed companies on the CSE, many traders may prefer to focus on more liquid international markets.

Is Day Trading Legal In Cameroon?

Day trading is legal in Cameroon but operates in a largely unregulated environment. No specific laws directly address day trading and general financial activities, which Gabon-based COSUMAF oversees.

The lack of targeted regulations for online trading platforms means traders often rely on foreign brokers regulated by reputable authorities like the UK’s FCA and Australia’s ASIC, as per DayTrading.com’s Regulation & Trust Rating.

How Is Day Trading Taxed In Cameroon?

Day trading in Cameroon is subject to taxation, but the specific rules can be unclear due to the lack of direct regulations on online trading.

Generally, profits from day trading may be considered part of your income and this is potentially subject to income tax under Cameroon’s tax laws.

The tax rate can vary depending on the total income, with progressive rates applying to different income brackets from 11% to 38.5%.

However, enforcement and reporting of day trading income could be more consistent, leading to an informal trading environment.

I suggest consulting with a local tax professional to ensure compliance with any applicable tax obligations as they relate to short-term trading.

A Cameroonian tax expert can also help ensure you get your returns into the Directorate General of Taxes, which operates under the Ministry of Finance, by the April 30 deadline for the previous tax year, which follows the standard calendar year.

Christian Harris

Author

Getting Started

To begin day trading in Cameroon, follow these three key steps:

1. There is no oversight from the BEAC in Cameroon, so choose a broker authorized by a trusted regulator, such as the UK’s FCA or Australia’s ASIC for a secure trading environment. An offshore entity may lack safeguards like negative balance protection and investor compensation, necessitating a conservative approach to trading.
2. Account verification usually requires a national identity card and a recent utility bill. Once approved, you can fund your trading account through wire transfers, debit cards, or, where available, popular mobile payment services in Cameroon such as MTN Mobile Money.
3. Stock traders in Cameroon may be able to invest in companies listed on the CSE. Meanwhile, currency traders can speculate on exchange rate fluctuations involving the CFA franc. However, despite its status as a regional currency, the CFA franc is not widely available on most trading platforms in our experience.

A Trade In Action

To help you understand how short-term trading in Cameroon could work, let’s consider a scenario with MTN Group, one of Africa’s largest mobile network operators serving over 288 million customers in 18 markets across the continent.

Event Background

The South Africa-based telecommunications group issued an earnings report showing earnings declined to 17.295 billion South African rand ($941.5 million) from ZAR 24.26 billion for the same period a year earlier.

The Group’s service revenue also fell to ZAR 42.90 billion from ZAR 52.83 billion with voice and data revenue falling 32% and 15%, respectively.

This negative financial outcome suggested potential downward momentum in MTN Group’s stock price.

Trade Entry & Exit

Considering all this financial data, I entered a day trade, betting on a short-term price decline. I set my sights on the early morning trading session. The stock opened at ZAR 9205, a slight drop from the previous close of ZAR 9270, likely due to the negative earnings report.

I placed a buy order at ZAR 9188 after the first 15 minutes of trading when the price started showing clear downward momentum. I also set a stop-loss at ZAR 9371, risking a maximum -1.99 % ROI on the trade should my analysis have proven wrong.

Thankfully, my decision was reinforced by increasing selling volume momentum.

MTN Group’s stock steadily dropped as the day progressed, reaching my take-profit price of ZAR 8819 by midday and securing a 4.02% gain.

This trade provided a solid return within a few hours, capitalizing on the market’s adverse reaction to MTN Group’s earnings report.

Bottom Line

As internet penetration improves – around 45% countrywide – and mobile money services become more widespread, a new generation of day traders is emerging in Cameroon.

Despite the promise, active traders in Cameroon must navigate an environment with limited financial literacy, high transaction costs, and the potential for regulatory crackdowns. There is also a significant risk to your capital – you could lose any Central African francs you invest.

Understanding the local economic landscape, banking infrastructure, and regulatory framework is crucial for anyone looking to engage in day trading in Cameroon.

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