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CFD Trading In Cameroon

Written By

Paul Holmes

Written By

Paul Holmes

Paul has over 14 years experience in the trading industry, both as a full-time trader and working with leading brokers. He’s traded indices and forex, developed proprietary day trading techniques, and built his own MetaTrader algorithms. He excels at delivering simple-to-follow guides for beginners to experienced traders.  

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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

Nov 21, 2024

Contract for difference (CFD) trading in Cameroon is gaining popularity, offering individuals a unique opportunity to access African and global financial markets.

Whether you’re interested in trading currencies like the Central African franc or shares listed on Cameroon’s stock exchange, CFDs provide a flexible way to speculate on price movements without owning the underlying assets.

This beginner’s guide will give you a clear understanding of CFD trading, tailored to investors in Cameroon.

Quick Introduction

• CFDs provide access to global markets, allowing Cameroonian traders to explore opportunities beyond local and regional assets. For example, you might trade gold prices.
• You’re not purchasing actual stocks, currencies, or goods; instead, you’re trading based on short-term price changes, which avoids physical ownership challenges.
• CFDs let you profit from both rising and falling markets. For instance, you could trade on the belief that crude oil prices will drop, a key factor for Cameroon’s oil sector economy.
• CFDs offer leverage, meaning you can control larger positions with a smaller investment. However, this amplifies profits and losses, which is important for new traders to understand.
• The Financial Markets Commission (CMF) is yet to introduce regulations specifically governing CFD trading in Cameroon, leading residents to overseas providers.

How Does CFD Trading Work?

CFD trading allows Cameroonian investors to engage with global markets without the extra cost and administration needed to own the assets.

With leverage, you can control and open larger positions but only need to commit a fraction of the total value (or margin) required to buy an equivalent number of popular shares listed on, for example, Cameroon’s Stock Exchange, the BVMAC.

Here’s how it works…

The BVMAC All Share Index, also known as the BVMAC ASI, is a primary stock market index that tracks the general market movement of all equities listed on the exchange, regardless of capitalization.

If you think the BVMAC will rise, you may buy a CFD position. If each CFD contract is valued at Central African CFA franc (XAF) 9,900 and your brokerage requires a 30% margin, then to take a position on 100 CFD contracts, you’d need a margin of XAF 297,000 (9,900 x 100 x 30% = XAF 297,000).

If the BVMAC rises to 10,000, the price increase will yield XAF 100 per contract. By closing your position, you would bank a total profit of XAF 10,000 (1,000 contracts x XAF x 100), excluding fees from your broker. But, if the index falls to 9,800, you will lose XAF 10,000.

Understanding how margin and leverage work is vital to your trading results, risk, and potential success.

If you are new to CFD trading, consider opening a demo trading account. They’re a terrific introduction to CFD trading, allowing you to build confidence before risking funds.

Paul Holmes

Author

What Can I Trade?

Cameroon has many trading opportunities for CFDs in various financial markets worldwide and in Africa:

• Stock CFDs – The BVMAC is a stock market that serves the six countries of the Central African Economic and Monetary Community (CEMAC): Cameroon, Central African Republic, Chad, Congo, Equatorial Guinea, and Gabon. You can trade some of the most active and popular individual and high-value Cameroonian stocks on BVMAC. You could also consider trading other stocks from US, European and Asian markets which are more widely supported in our experience.
• Index CFDs – You may be able to trade the BVMAC All Share Index  as a CFD. Some traders based in Cameroon will prefer to trade market indices to capitalize on a stock exchange’s overall performance rather than trade individual stocks. Alternatively, top global index CFDs like the Dow Jones and the FTSE have high liquidity and trading volume, resulting in competitive trading costs.
• Forex CFDs – The Central African CFA franc (XAF) is a currency traded in the foreign exchange market. An actively traded XAF currency pair is the USD/XAF, which is popular due to the international petroleum trade, which accounts for nearly half of Cameroon’s exports. It offers opportunities for short-term currency traders interested in trading XAF. Still, spreads trading exotic and minor pairs are higher than those for major USD and EUR pairs.
• Commodity CFDs – Vital global commodities, such as precious metals like gold and silver and crude oil, can be traded as CFDs. This lets you speculate on price movements often linked to domestic and regional economies and macroeconomic events.
• Crypto CFDs – The appeal surrounding trading digital assets has attracted the attention of Cameroon’s traders. You can trade cryptocurrency CFDs like Bitcoin and Ethereum to avoid the complexities and security issues associated with owning and storing crypto.

Is CFD Trading Legal In Cameroon?

While CFD trading is legal in Cameroon, the lack of local regulation means traders need to exercise caution.

In Cameroon, financial regulation is primarily handled by the Financial Markets Commission (CMF) (Commission des Marchés Financiers).

The CMF oversees the securities market, ensuring fair practices and protecting investors. However, its jurisdiction mainly covers traditional financial instruments such as stocks, bonds, and other securities listed on local exchanges.

This means Cameroon does not have specific laws or regulatory frameworks for online trading platforms or derivatives like CFDs. This leaves traders reliant on foreign providers regulated in jurisdictions like:

• Europe: Regulated by authorities such as the Financial Conduct Authority (FCA) or Cyprus Securities & Exchange Commission (CySEC)
• Australia: Overseen by the Australian Securities and Investments Commission (ASIC)

As online CFD trading continues to grow in Cameroon, the government may eventually develop policies to regulate these activities. For now, international regulation and self-education remain the critical safeguards for Cameroonian traders.

Paul Holmes

Author

Is CFD Trading Taxed In Cameroon?

Income from CFD trading in Cameroon is subject to taxation, but the specifics depend on how the government classifies such earnings.

Since no direct tax policy is tailored to online trading or CFDs, traders must navigate existing tax laws for guidance.

Profits from CFD trading are typically considered part of an individual’s income. Cameroonian tax law imposes income tax on residents based on their worldwide income, which may include trading profits.

If CFD trading is part of a registered business, the profits may fall under corporate taxation laws or business income taxes.

Since CFD trading isn’t explicitly addressed in Cameroonian tax law, traders are responsible for reporting their earnings. This includes calculating net profits (profits minus losses) and declaring them as part of annual income during tax filing.

I’ve found most international CFD brokers do not deduct taxes at the source. This means it is up to you to report and pay any applicable taxes to Cameroonian authorities.

Personal income tax rates in Cameroon are progressive, ranging from 11% to 38.5%, depending on your total annual income. If classified as business income, additional taxes, such as VAT or other levies, may apply.

Since many brokers operate in foreign currencies (eg USD or EUR), Cameroonian traders should also account for exchange rates when calculating taxable income.

To remain compliant with tax laws:

An Example Trade

The BVMAC is a small exchange with few listed companies and an all-share index with thin liquidity. Consequently, assets like stocks and the index are prone to sudden swings and extreme volatility.

The cost of such trades can be uneconomical because the spreads and commissions are high, and fills can be random as brokers struggle to guarantee price. So, in such circumstances, I prefer to look towards the forex markets to trade as an example.

I’ll consider a USD/XAF forex CFD trade here. Due to Cameroon’s high export volume of petroleum products, predominantly priced in USD, this exotic currency pair has reasonable liquidity, and the spreads can be cost-effective if you’re looking at a swing trade.

Fundamental Analysis

If I’m considering swing trading a currency pair, I engage in fundamental analysis of the countries involved. I’ll look for metrics on inflation, export/import trade, GDP growth, debt v GDP, unemployment, etc.

I use my economic calendar filters to drill down for the information I want on a specific country’s data. With the USD, I generally have a constant handle on the performance of the US economy, but bear in mind as USD is the globe’s reserve currency, it takes quite a shift in perspective and sentiment for the USD to fall in value versus minor currencies such as Central African CFA franc (XAF).

Technical Analysis

I keep my charts uncluttered. Experience has taught me that adding more technical indicators (TIs) to my charts, regardless of the time frame, doesn’t translate into more competence or better information.

Where currency pairs are concerned, you look for indicators that reveal trend, momentum, volume and volatility. So, in theory, you need four TIs, one from each group.

But in reality, some indicators duplicate information and never lose sight of the fact that you’re looking for price-action to profit because you don’t make money trading sideways in markets.

If I want to trade an exotic pair, I’ll avoid it on a day-trading basis and never scalp trade. The spreads, fills, and costs are too high and unpredictable.

However, if you swing trade, you can justify the costs because you can absorb them into the trade cost. For example, if the spread on USD/XAF is 10 pips, and you’re looking to bank 100 pips on the move, then it’s as economical as looking for a 10-pip move on USD/JPY if you pay a spread of 1 pip.

I’m using only one indicator for my technical analysis, the MACD. In my opinion, the MACD covers several bases. It can indicate a trend or momentum and reveal reversals which double up as entry and exit points.

Below is a textbook example of using the MACD combined with Heikin Ashi candlesticks to identify formations.

4HR Timeframe

Below, we can clearly see bullish periods interspersed with ranging conditions. From left to right, we see a bullish period, a ranging period, a return to bullishness, followed by a short sell-off and a return to bullishness again.

The Heiken Ashi candlestick formations are simple to understand and interpret and can be used to spot price action. But it’s the MACD that delivers the most prominent feedback, as it perfectly follows the price patterns while delivering perfect entry, exit, and reversal points, as illustrated by the four blue arrows.

One of the most important features and benefits of using TIs is the ability to manage risk. If you entered in accordance with the blue arrows and took four trades over the period shown, you’d have banked reasonable profit.

But, critically, you’d have stuck to your strategy and not breached your trading rules, particularly if you’d placed your stop below the recent lows or above the recent highs, depending on your trade direction.

The trade I took resulted in close to breaking even, and I used a CFD FX trade to enter long at 620.00 and exited at 621.00 with a stop loss order at 617.00 (the most recent low).

However, it’s worth concentrating on how effective the MACD entry and exit points proved to be in managing risk. Although the trade generated next to no profit, it illustrates how, if you use indicators as part of an effective risk management strategy, you can cut potential losses dead as soon as possible.

Paul Holmes

Author

Bottom Line

CFD trading in Cameroon opens doors to global financial markets, offering flexibility and opportunities for traders to grow their portfolios.

While it’s legal and accessible through international brokers, the absence of local regulation means traders must exercise caution, choose reputable platforms, and educate themselves thoroughly.

To start trading CFDs in Cameroon, check out our top CFD trading platforms and select the provider that best meets your needs.

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