The Nigerian stock market has been booming in the past couple of years, making it one of the best-performing and fastest emerging stock markets in the world. What is driving this emerging economic market is economic reforms and a surge in both domestic and foreign investments. In early 2024, Nigeria’s equities market gained a steep percentage increase in the first two months, which made the Nigerian stock market Africa’ top-performing stock market.
This stock market boom has intrigued many individuals who are exploring trading stock as a viable way to build wealth. By trading stocks, including swing trading, Nigerians can take part in the booming stock market and enter the global economic markets.
An introduction to stock trading
When talking about trading stocks, it refers to buying and selling shares of publicly listed companies. Essentially, when buying a stock, you own a small portion of the company. The main goal of trading is therefore to buy stocks when they are at a low price and sell them at a higher price to make a profit.
There are various types of stock trading. A common one is day trading, which involves buying and selling stocks within a single trading day. Essentially, traders try to capitalize on small price movements. A medium-term strategy is swing trading, where traders hold stock for several days or sometimes weeks to capitalize on price swings. Leveraging this type of trading is based on profiting from upward and downward trends in stock prices. Position trading is yet another type of stock trading, which involves holding stocks for a longer period, either months or years, with the goal of benefiting from long-term market trends.
Why swing trading is worth considering
Among traders, especially beginners, swing trading has become a popular strategy as it does not require constant attention in comparison to day trading. This strategy inherently contains flexibility, as you can hold onto stock for days or weeks, giving you the opportunity to wait for optimal buying and selling points based on price swings. When doing swing trading, it is common to leverage technical analysis, such as charts and patterns, to predict the short-term movement of stocks.
Take this example: A trader notices that a particular stock in the Nigerian banking sector consistently rises and falls within a 10-day window. This can result in the trader purchasing shares when the prices dip, with the expectation that the price will rise again in the coming days, which the trader can then leverage to sell at a profit.
Getting started with online stock trading in Nigeria
If you have started to look for ways to generate a viable income and to capitalize on the booming stock market in Nigeria, then you are in luck: The increasingly accessible online trading platforms has made it simple for anyone to get involved in trading stocks. The first thing you should do is to find a reliable broker. A stockbroker is an intermediary between you and the Nigerian Exchange Group (NGX). Many brokers, such as Exness, offer an online platform with brokerage services for a variety of financial instruments. Once you have picked the broker, you should open a stock trading account, which will be where your shares are kept. Then you need to fund this account, which can be through bank transfers, online payments, and in some instances through mobile money.
Once your account is set up and funded, you can start research companies. It is recommended for newcomers to start by investing in larger and well-known companies, since they typically have a strong market position. If you are looking into swing trading, then you can use technical analysis to time your trades. This entails studying stock price charts and identifying patterns, including support and resistance levels. After thorough research, you can start trading by placing buy and sell orders through the online trading platform.
Recent trends in Nigeria’s stock market
In recent years, the Nigerian stock market has been substantially growing, which has caught the eye of many traders. On August 30, 2024, the NGX All-Share Index closed at 96,579.54 points, reflecting a gain of 29.16% and a market capitalization of NGN55.49 trillion. This growth was driven by investor optimism as a product of economic reforms, and strong performances from key sectors in the country, including banking, consumer goods, and telecommunications.
One sector of society that has increased its participation in the market are retail investors. The numbers reflect that almost two-thirds of total transactions in the first half of 2024 were made by domestic investors. These numbers are mirroring the growing interest in stock trading among Nigerians.
Final thoughts on trading stock in Nigeria
There is no doubt that there are great benefits with trading stocks in Nigeria. The strong performance of Nigeria’s stock market gives it high growth potential, including the potential for high returns when the market is bullish. Trading stocks also entails liquidity, as stocks can be bought and sold easily. Furthermore, by investing in multiple sectors, traders can reduce risks.
But as with anything else in life, there are also potential risks related to trading stocks. Stock prices fluctuates and the market can be volatile, coupled with the fact that successful trading relies on a deep understanding of market trends. However, with the rise of online trading platforms, more people have access to user-friendly platforms and material which can help educate and make robust decisions when it comes to trading stocks.
