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Forex Trading In Zambia

Written By

Tony Kent

Written By

Tony Kent

Tony is an active trader and property investor with 20 years experience working with some of the largest companies in financial services worldwide. Skilled at technical and fundamental analysis, alongside risk management, he has seen success dealing an array of tradable instruments, from currencies, equities and commodities to higher-risk vehicles like cryptocurrencies and CFDs.

» Tony Kent 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

Nov 5, 2024

With Zambia one of the emerging African economies with significant potential, alongside a strengthening kwacha in recent years, the country is home to a growing number of forex traders.

Yet despite the growth of the country’s forex market, there remain challenges for traders. These include limited access to market research and evolving regulatory oversight.

This beginner’s guide to forex trading in Zambia unpacks the basics and walks through a EUR/ZMW trade.

Quick Introduction

• Forex trading involves buying and selling currencies, such as the Zambian kwacha (ZMW) against the US dollar (USD/ZMW), aiming to profit from changes in exchange rates.
• Short-term Zambian traders may prefer to focus on currency pairs like EUR/USD and USD/JPY, as the kwacha is not widely supported by brokers and experiences low volumes.
• The Bank of Zambia (BoZ) and Securities and Exchange Commission (SEC) of Zambia oversee the country’s foreign exchange markets, but they are not as mature and offer limited safeguards compared to ‘green tier’ bodies in DayTrading.com’s Regulation & Trust Rating.
• For day traders, the best opportunities generally arise during the London and New York session overlap (2PM-6PM Zambian time), when market volatility and liquidity are greatest.

How Forex Trading Works

Forex trading, or FX trading, involves the conversion of one currency into another, with around $7.5 trillion worth of forex transactions every day according to the Bank for International Settlements (BIS).

Day traders aim to capitalize on short-term currency fluctuations between the currencies, which are traded in pairs. For example, if you believe the US dollar (USD) will strengthen against the Zambian kwacha (ZMW), you’d buy the USD/ZMW pair.

Conversely, if you think the kwacha will strengthen, you’d sell USD/ZMW, and if the rate falls, you’d buy back USD at a lower price, profiting from the difference.

Currency pairs that may be of interest to Zambian traders include USD/ZMW, EUR/ZMW, and GBP/ZMW, but you won’t find these at most international forex brokers from our investigations.

The foreign exchange market has historically played a critical role in Zambia’s economy, allowing businesses to manage the risks associated with currency fluctuations.

For example, a Zambian company that exports goods to other countries may use the forex market to hedge against the risk of the Zambian kwacha appreciating against the currencies of their overseas customers, which could make their exports less competitive.

Tony Kent

Author

Getting Started

You can start trading currencies in three straightforward steps:

1. Choose a top forex broker in Zambia: Given the limited number of domestic brokerages, Zambians typically use international brokers. It’s important to choose a well-regulated provider to reduce the risk of forex trading scams. Also, if you’re new to trading currencies online, consider a demo account and look for educational content.
2. Deposit funds: Depending on the payment methods supported by your brokerage, you can deposit to your trading account via bank transfer, debit card, Apple Pay, or possibly local payment providers such as SoPay or PayCly. However, you’ll struggle to find a forex broker with a ZMW account (we haven’t found one yet) so you may need to pay conversion fees when doing business.
3. Execute trades: Use the desktop client, web platform or forex app provided by your brokerage to analyze the market, identify opportunities and place and manage trades. I recommend starting with a demo account if it’s a new platform or strategy that you’re trying for the first time.

Is Forex Trading Legal In Zambia?

Forex trading is 100% legal in Zambia provided brokers operate with a license from the Securities and Exchange Commission (SEC) of Zambia. Regulations introduced in 2018 aim to protect forex traders while ensuring brokerages operate transparently.

Licensed brokers are required to keep segregated client funds to prevent them from being misused and must submit regular reports to ensure they are fully compliant. They must also hold minimum capital funds of 500,000 kwacha.

Still, Zambia’s regulatory environment is still evolving, especially compared to Western markets and nearby South Africa, where the Financial Sector Conduct Authority (FSCA) directly licenses many more forex trading platforms.

Is Forex Trading Taxed In Zambia?

There is no capital gains tax in Zambia, but forex traders are obliged to declare trading profits or losses as investment income on their tax returns and pay progressive personal income tax rates ranging from 20-37.5%.

Returns need to be submitted to the Zambia Revenue Authority (ZRA) by 21 June of the following year. If you earn above ZMW 57,600, you may also need to submit quarterly provisional tax returns.

When Is The Best Time To Trade Forex?

For Zambian traders, optimal trading times typically align with major global forex market activity. Here are key trading windows, suitable currency pairs, and some tips for maximizing trading opportunities:

• London Session (9AM – 5PM Zambian time): The London session is one of the biggest forex markets and great for trading pairs like EUR/USD, GBP/USD, and EUR/GBP. You’ll find high liquidity and significant price movements due to European market activity. Why trade: High liquidity, strong European market influence.
• New York Session (2PM – 10PM Zambian time): The New York session is key for trading USD-based pairs, such as USD/JPY, GBP/USD, and EUR/USD. It overlaps with the London session, leading to increased volatility and market-moving events like US economic reports. Why trade: Major price movements and volatility, especially with USD pairs.
• London-New York Overlap (2PM – 6PM Zambian time): The overlap between the London and New York sessions is the most active period for forex trading. This is normally the optimal time to trade pairs like EUR/USD, GBP/USD, and USD/JPY, as liquidity peaks and markets experience the greatest volatility. Why trade: Maximum trading volume and volatility, ideal for short-term traders.
• Asian Session (Midnight – 9AM Zambian time): The Asian session offers lower volatility, making it more suitable for pairs like AUD/USD and USD/JPY. This session is calmer and better for traders who prefer less volatility. Why trade: Lower volatility, suitable for more cautious strategies.

An FX Trade In Action

To show you how forex trading in Zambia works in practice, let’s run through a trade I executed with the EUR/ZMW currency pair.

As someone focusing on technical analysis, I use the momentum bounce strategy for forex trading on the daily timeframes or lower.

With price action in a clear downtrend on the weekly and daily time frames and breaking through the 20 and 50-day moving averages, I looked for further confirmation on lower timeframes before deciding to enter the trade using confirmed support and resistance levels for both my trade entry and exit points.

Using confirmed and established support and resistance levels, I executed the trade on the 4-hour timeframe to get a tighter entry, setting a sell order at 630.50 and a take profit order at 623.50. The trade played out as planned, and I exited in profit.

Bottom Line

Forex trading in Zambia represents risk and opportunity, which traders need to weigh up carefully.

The regulatory environment is still evolving and trading currency pairs containing the Zambian kwacha is challenging due to low trading volumes and limited accessibility.

There aren’t many domestic forex brokers, but to get started, you can use DayTrading.com’s pick of the top forex day trading platforms in Zambia.

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