1. Home
2. Day Trading in Cameroon

Forex 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.  

» Paul Holmes Profile Page

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

Sep 24, 2024

With over 55% of Cameroonians living in poverty, and a GDP per capita of approximately $1,500 per annum, ranking the country 17th in African GDP, opening an account to trade currencies is an attractive investment option for many, even with modest amounts of disposable income.

Looking to start forex trading in Cameroon? This guide for beginners will arm you with the essentials.

Quick Introduction

• USD/XAF is the most traded currency pair with Central African CFA franc (XAF); South Africa’s rand (ZAR) is also popular. XAF has proven to be resilient versus USD in recent years; not suffering the notable depreciation of other African currencies.
• The country’s financial system is overseen by the Ministry of Finance, Bank of Central African States (BEAC) and Central African Financial Market Supervisory Commission (COSUMAF). However, their focus is not on forex trading, leaving the market without direct oversight.
• The best time to trade forex in Cameroon is arguably during the overlap of the London and New York sessions (1:00 PM to 5:00 PM West African Time), as it offers the greatest liquidity and volatility in key currency pairs.

Forex Brokers in Cameroon

How Does Forex Trading Work?

Forex traders engage in buying and selling currency pairs such as USD/XAF (US Dollar/Central African CFA Franc) or EUR/USD (Euro/US Dollar), aiming to profit from fluctuations in exchange rates.

You would:

• Buy a currency pair if you expect the base currency (the first currency in the pair) to strengthen, and
• Sell it if you anticipate the base currency will weaken.

The exchange rate shows how much of one currency you can exchange for another. For instance, if the USD/XAF rate is 590, this means you can trade 1 USD for 590 XAF.

For Cameroonian traders, the USD/XAF pairs is particularly important because the Central African CFA Franc is commonly used in cross-border transactions within the Economic and Monetary Community of Central Africa (CEMAC) region.

However, like some other currency pairs involving regional currencies, such pairs may experience lower liquidity and availability on online trading platforms, which can make short-term trading strategies more challenging.

Is Forex Trading Legal In Cameroon?

Forex trading is not illegal in Cameroon; no laws prohibit individuals from trading currencies. But it’s unregulated; no financial authority actively oversees forex trading activities.

The Ministry of Finance, the Bank of Central African States (BEAC) and the Central African Financial Market Supervisory Commission (COSUMAF) regulate the general financial sector but do not actively license forex providers.

Due to the lack of local regulation, many Cameroonian traders use international brokers regulated in jurisdictions like South Africa (FSCA), UK (FCA), and Australia (ASIC).

These brokers operate legally in Cameroon, as there are no restrictions on using foreign brokers.

Paul Holmes

Author

Is Forex Trading Taxed In Cameroon?

Forex trading in Cameroon is not specifically taxed because the industry operates in a largely unregulated and informal environment, but traders should be aware of potential tax implications.

Personal tax rates start from zero for incomes up to XAF 500,000 and 38.5% for incomes above XAF 5,500,000.

Due to complexities in calculating and applying exemptions, it’s worth consulting a tax professional to ensure accurate reporting and compliance with Cameroon’s tax laws.

When Is The Best Time To Trade Forex In Cameroon?

Understanding the global forex market sessions can help Cameroon traders optimize trading times for potentially greater returns. Cameroon operates on West Africa Time (WAT), GMT+1.

• London Session (8:00 AM – 5:00 PM WAT): One of the most active forex trading sessions. It overlaps with the end of the Asian session and is the largest forex market, accounting for about 35% of the total daily trading volume. Currency pairs like EUR/USD and  GBP/USD are more liquid during this time, offering tighter spreads and better trading opportunities. It is suitable for day traders looking for significant price movements.
• New York Session (1:00 PM – 10:00 PM WAT): This period overlaps between the London and New York sessions, making it the most active time of the day, with high volatility and liquidity. Often considered the best time for trading due to the volume of market participants and release of critical economic data from the US for pairs involving the US dollar, such as EUR/USD, GBP/USD, USD/CAD, and USD/XAF experiencing significant movement. Scalpers and day traders thrive on volatility, applying news-based trading strategies when US economic data is released.
• Tokyo Session (12:00 AM—9:00 AM WAT): This is the start of trading for Asian markets, with activity in pairs involving the Japanese yen. An excellent time to trade pairs like USD/JPY, AUD/USD, and other Asian currencies. Traders focus on yen pairs; trading in quieter markets is ideal for beginners.
• Sydney Session (10:00 PM—7:00 AM WAT): The Sydney session overlaps with Tokyo and is generally the least volatile. Optimal for trading pairs involving the Australian dollar like AUD/USD and New Zealand dollar like NZD/USD, traders who prefer calmer market conditions, and those looking to trade Asian-Pacific currencies with less competition.

A USD/XAF Trade

To show you how forex trading in Cameroon works in practice, I’m looking at opportunities to trade USD/XAF.

Background

Whenever I trade minor or exotic pairs, I know I won’t get the same optimized trading conditions as when trading major pairs like EUR/USD.

I don’t scalp or day trade such currency pairs, as the fills, spreads, lack of liquidity, and potential price (and information) gaps can limit profitability. So, I’ll look for swing or position trade opportunities when trading exotics like African pairs.

I always recognize the USD’s dominance as the globe’s reserve currency, despite any monetary or fiscal policy that Cameroon may announce. If the USA prints bullish economic news or the Fed alters its monetary policy, the USD will likely rise or fall versus nearly all counter currencies.

Analysis

I’ll always do my homework about the economy of the weaker counter currency. So, I’ll dig around for any financial news while accessing my economic calendar; I look for upcoming vital economic indicators like GDP, employment rates, interest rate policy, export data, etc.

The line graph above shows that the CAF had been strong vs USD over the year. The stable currency suggests Cameroon’s economy and the broader economic area were faring well despite the typical emerging economy issues.

Moving onto the technical information on my preferred timeframes, I want to identify the trend and trade with it, not against it.

I’ll look at the daily chart and higher time frames, like the weekly or monthly, to develop a strategy for taking a trade (long or short).

I’ll also apply specific trusted technical indicators to underpin my decision. I have more faith in their functionality on higher timeframes, considering they were created to work best on daily, weekly and monthly timeframes.

The monthly time frame chart below quickly identifies that the long-term trend is bearish. However, the Bollinger Bands have narrowed, and the moving averages on the Moving Average Crossover Divergence (MACD) are close to convergence.

The Relative Strength Index (RSI), which indicates volatility, oversold, and overbought conditions, showed a reading of 41.5, close to the oversold area at 30.

Turning to the daily chart, I’m concentrating on the candlestick price action and looking for signs that the currency pair might end its bearish momentum.

In the preceding days, the currency pair had been ranging in a narrow channel, failing to make new lows and printing higher lows, which can indicate momentum ending.

Although the BBs were still wide, the MACD moving averages were close to convergence, and at a reading of 25, the RSI suggests the currency pair is significantly oversold.

Execution

I’ve taken a long position trade. I’m not necessarily trading against XAF, but I’m predicting that USD will gain strength versus most emerging economy global currencies.

Having analyzed the charts, I was also convinced that XAF’s bullish period was over, at least over the medium term, for the remainder of the year.

I risked a small percentage of my account on this trade, 0.5%, and I also picked a target price above the current price to enter because that would confirm my bullish analysis.

I always trade with a stop-loss order, but won’t apply a profit-limit order this time. Instead, if the price reaches a level close to 620, I’ll probably close the trade at a profit.

My deal ticket is a market order at 601 and a stop-loss order at 580.

Bottom Line

Forex trading in Cameroon offers opportunities, especially during peak trading times when the London and New York sessions overlap, providing high liquidity and volatility.

However, success in forex trading requires understanding market dynamics, staying informed about economic news, and maintaining disciplined risk management. Never risk more African francs than you can afford to lose.

To get started, jump into DayTrading.com’s pick of the top forex trading platforms in Cameroon.

Recommended Reading