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Forex Trading in Uganda

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

Sep 17, 2024

Powered by the latest technology, forex trading has become an investment opportunity in Uganda, especially among young people and those looking to diversify their income sources.

Around 80% of Uganda’s exports are agricultural products, and a similar percentage is employed in the sector. Therefore, a foreign exchange transaction infrastructure mainly driven by USD (US dollar) conversion to UGX (Uganda Shilling) has been established for decades.

Interested in forex trading in Uganda? This guide for beginners will kickstart your journey.

Quick Introduction

• Forex trading in Uganda is regulated by the Capital Markets Authority (CMA) and Bank of Uganda (BoU), with the BoU responsible for managing the stability of the Ugandan Shilling.
• Ugandans can trade local currency pairs like USD/UGX, plus global pairs like EUR/USD and USD/JPY, with internet penetration in the country making it easier to trade currencies online.
• Uganda’s economic conditions, notably inflation rates, interest rates, and political stability, can significantly influence the value of the Ugandan Shilling. Equally, global economic events, like shifts in oil prices or central bank policies, can profoundly impact forex trading outcomes.

Forex Brokers in Uganda

How Does Forex Trading Work?

Forex trading in Uganda works similarly to how it operates globally, with a few local specifics.

It involves trading currency pairs, such as USD/UGX (US Dollar/Ugandan Shilling) or EUR/USD (Euro/US Dollar). However, USD/UGX is not widely supported on international trading platforms based on our investigations.

When you trade a currency pair, you buy one currency while selling another. You buy a currency pair if you expect the base currency (the first currency in the pair) to appreciate and sell if you expect it to depreciate.

The exchange rate between the two currencies in a pair determines how much of one currency you can buy with another. For example, if the USD/UGX rate is 3,800, you can exchange 1 USD for 3,800 UGX.

Despite being regarded as one of the globe’s poorest (GDP per capita less than $1,000) and politically unstable countries, Uganda’s GDP has risen.

A growing GDP signals economic improvement, potentially leading to rising capital inflows and currency liquidity, possibly presenting trading opportunities.

Paul Holmes

Author

Is Forex Trading Legal In Uganda?

Forex trading is legal and regulated in Uganda to ensure trading activities are conducted within a legal framework and that traders’ interests are protected. Nonetheless, it remains a high-risk activity and you could lose any money you invest.

• The Capital Markets Authority (CMA) ensures brokers offering forex trading services operate within legal guidelines and maintain fair practices. Forex providers must meet specific standards of transparency, financial stability, and customer protection.
• The Bank of Uganda (BoU) regulates aspects of the foreign exchange market, providing stability in the currency market and monitoring activities. It may intervene in the FX market, buying or selling Ugandan Shillings to manage exchange rate fluctuations and maintain macroeconomic stability.

Is Forex Trading Taxed In Uganda?

Profits earned from trading currencies online are taxable income under Ugandan tax law. Here’s how it works:

Forex trading profits are generally treated as part of your income and are subject to up to 40% personal income tax. The specific tax rate depends on the profit and your yearly income.

If forex trading is conducted through a registered company, the profits are subject to corporate income tax, currently 30% in Uganda.

You must report your profits in annual tax returns to the Uganda Revenue Authority (URA) after calculating the net profit from forex trading activities and deducting allowable expenses.

To report your income accurately, keep accurate transaction records, including trade confirmations, profit and loss statements, and relevant documentation.

Compliance with tax laws is essential to avoid legal penalties that erode any returns you make from trading currencies online.

That’s why I recommend seeking professional advice from an accountant familiar with the latest tax regulations in Uganda.

Paul Holmes

Author

When Is The Best Time To Trade Forex In Uganda?

The best times to trade forex in Uganda generally depend on the overlap of global forex market sessions. These periods typically offer the highest trading volume and liquidity, leading to more trading opportunities, especially for fast-paced strategies like forex day trading.

• London-New York Overlap (3:00 PM – 7:00 PM EAT): One of the most active trading periods. London and New York sessions experience increased liquidity and volatility. Major currency pairs like EUR/USD, GBP/USD, and USD/JPY see significant movement during this time, offering the best opportunities for short-term traders who rely on volatility to make profits.
• London Session (10:00 AM – 7:00 PM EAT): The London session is the most active forex session, with the highest volume of transactions. Many major European economic reports are released during this time, influencing currency movements. Traders in Uganda who prefer trading European currencies like EUR, GBP, and CHF might find this session particularly favorable.
• New York Session (3:00 PM – 12:00 AM EAT): The New York session is the second most active. Important economic data from the US and Canada is released during this time, affecting pairs like USD/UGX, USD/JPY, and USD/CAD. This session is ideal for traders focusing on USD-related pairs and those who trade in Uganda in the late afternoon or evening.
• Tokyo-London Overlap (10:00 AM – 11:00 AM EAT): While shorter and less active than the London-New York overlap, it presents opportunities for online trading, especially for currency pairs involving JPY, such as USD/JPY or EUR/JPY. Traders interested in Asian and European currency pairs might target this overlap.

A USD/UGX Trade

To show you how trading currencies works in practice, let’s walk through an example trade…

When day trading exotic and minor currency pairs, I always scope out the long-term trend before engaging in fundamental and technical analysis. The line chart below shows the Ugandan shilling’s performance over the past year (at the time of trading).

The USD had fallen sharply vs UGX, corresponding with the BoU lowering interest rates to 10% as the country’s inflation rate reduced from 7.20% two years earlier to 4%.

GDP, inflation, interest rate figures, and the overall economic commentary provided by the likes of the World Bank also give me a good handle on Uganda’s economic situation. However, such granular analysis can often be superseded by the relative strength of USD as the globe’s reserve currency.

Trade Set Up

When trading exotic and minor pairs, I’m always mindful of the lack of liquidity and the potential for increased volatility. The spreads can be wider, and the fills less precise.

That’s why, if I identify an opportunity, I often use a swing trading mindset rather than attempt to day trade such pairs. That way, I’m not as focused on the spread being as tight, and because I’m aiming for more pips, I can absorb a fill away from my target market price.

When analyzing daily time frames, I combine candlestick price action with indicators I trust. In my experience, the higher the time frame, the better the indicators work, considering their creators intended them to be traded on higher time frames.

In this example, I’ve chosen PSAR, MACD, and RSI, a combination of oscillators and momentum indicators that don’t replicate the same information.

• The PSAR can indicate when a trade direction has stopped and reversed.
• The MACD suggests when a trade momentum has ended.
•  The RSI indicates when a security is oversold or overbought.

Trade Execution

My combined signals to short USD/UGX involved the PSAR appearing above the price, indicating bearish sentiment, the MACD moving averages crossing, the histogram changing colour, and the RSI above the median 50 line, potentially indicating an overbought security.

To confirm my decision, I’ll also look for reversal candlestick patterns, such as dojis, hammers, and morning stars.

My deal ticket contained the following instructions: entry 3735, stop loss order 3750, and profit limit order 3690 (close to recent lows). I’ve also put a time limit on this trade; I’ll cancel if the momentum stalls.

Bottom Line

Forex trading in Uganda is legal and regulated by the (CMA) and (BoU).

Traders can use local and international brokers, with internet penetration across Uganda and faster, more powerful platforms enabling access to global currency markets.

Profits from forex trading may be taxable, and traders must comply with the latest rules from the Uganda Revenue Authority. Keep accurate records and stay informed about global economic events that can impact currency prices.

To get moving, see DayTrading.com’s pick of the top forex trading platforms in Uganda.

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