Forex Trading South Africa, The foreign exchange market, or Forex, is the largest financial market in number of daily transactions. Being a leveraged market, it offers high gains, but implies high risks. Before you venture out, understand what it is and how it works.
Many beginners looking to make investment gains come to Forex Trading South Africa, with promises of earnings well above the average of other investments.
It is normal to choose this instrument, as it has great potential for profits derived from trading with margin.
However, this same margin, which can offer high profits, also implies high risks for those who do not understand or learn to deal with this investment tool.
What is Forex Trading South Africa and how does it work?
The Forex market is the largest financial market in value with daily transactions in excess of 5 trillion dollars.
Largest financial market in terms of the number of clients that trade daily.
Regulated and existing market since 1971.
Market related to exchange rate differences between the currencies of each country. In this financial instrument, we do not buy assets but negotiate fluctuations / differences in value between two currencies.
As explained above, the foreign exchange market works with currency pairs, sending that each asset is a set of 2 different currencies, such as EURUSD – which in this example is the pair composed of the Euro and the US Dollar.
Open 24 hours a day, 5 days a week. The foreign exchange market is open from Sunday night to Friday night.
How Forex Trading South Africa works?
The cambia market is the largest world market in terms of money traded daily. It handles more than 5 trillion dollars traded per day.
To get an idea of the size of daily transactions, we can compare with the American stock market.
The American exchange trades around 250 billion USD against the more than 5 trillion in FOREX.
All other combined markets, Exchanges, Binary Options, and others, do not have the daily volume that Forex has.
It is a market that works 24 hours a day, 5 days a week.
This allows for greater volume and more time to perform operations.
This increases the global volume and helps to have more operations, and therefore more profit.
Since 2004, the Forex market has grown exponentially, due to the appearance of Online Brokers. This was made possible by the appearance and development of a platform with the name of MT4.
MT4 (Metatrader 4) revolutionized the form of trading, offering customers a practical, simple and understandable platform. Meta Trader 4 is now used by a large number of Brokers. Its platform is available for Desktop, Android and IOS. Today, as long as we have access to the Internet, we can be connected to the market. We can trade anywhere and anytime on our account. The MT4 platform is free and very light.
Forex Trading South Africa for Beginners
If you are starting to trade or are interested in the foreign exchange or FX market read our article with tips and first steps for beginners.
In the article we explain the first 3 steps, such as brokers, ways of trading, care, etc.
Read the article: How to Start Forex
Is Foreign Exchange Market Fraud?
No, it is not a fraud and we have already seen that it is a regulated market.
But then why are there so many frauds linked to the foreign exchange market?
In reality the frauds and financial pyramids that have been around for the past few years, just use the name Forex to look honest.
These financial pyramids that we hear about, never invest in this market.
They simply use people’s money to pay others and build trust with new customers.
Then they just disappear with people’s money.
They never invest in Forex.
That is why this market is labeled fraud, when in fact it is a victim of the earnings potential it can offer.
How does it operate?
Forex trading South Africa involves buying one currency and simultaneously selling another.
Currencies are traded in PAIRS, for example: the Euro and the Dollar (EUR / USD).
The investor does not physically buy dollars or euros, but a monetary exchange ratio between them.
Thus, when someone makes a transaction in that market, they are not buying a certain currency.
Yes, you are buying a certain PAR, an exchange rate between the two currencies.
The transaction is made through a purchase or sale order of the Par (eg EUR / USD).
If you go for a purchase, you are betting on how the EURO currency will appreciate and the Dollar devalue, since the comparison is always made by the currency on the left.
On the contrary, if you enter for sale, you are betting that the EURO currency will devalue and the Dollar will appreciate.
After choosing the asset, you must choose the value. The platforms operate in batches, that is, in quantity.
So the operation is in quantity, for example you can buy or sell 0.01 lots, not in value, because you do not buy $ 10 or $ 20, but a portion of a lot.
After choosing the asset and the amount to trade, click on open order. After opening it is advisable to place a price like Take Profit which is the value you think how far the market will evolve and when establishing this value, establish your gain value you want to have with that operation.
The opposite is also true, which is to establish the maximum loss amount you want to have. This value, Stop Loss, leads to many discussions, as many traders today, prefer not to use it, as they say that the market always fluctuates and all orders when placed well, end up giving a profit.
With the fluctuation of rates and the relative value between currencies, different investment strategies can be structured, which can result in profits or losses.
Normally, currency prices do not vary dramatically in a short period of time, which should raise doubts about the veracity of the high-yield promises that often accompany investment offers in this market.
How is it possible to make good profits?
The answer lies in using “margin” to operate.
This mechanism allows you to trade a larger volume of money by applying only a part.
As the operation is settled only by the difference between the valuations of different currencies, it is not necessary for the investor to have available the full amount of resources involved in the operation.
FOREX in South Africa allows only a “margin” to be deposited to cover the daily variations of currency pairs.
The margin gives the investor greater power to operate, thus being able to carry out large-scale operations.
In most Brokerage Houses the margin is 100: 1, which can go up to 1000: 1.
It allows the investor / trader to make a transaction with a reference value of 100 thousand dollars, for the example of 100: 1, depositing only 1,000 dollars.
Or deposit only $ 100 if the margin is 1000: 1
This structure allows to realize greater PROFITS, BUT IT ALSO ENDED UP WITH MORE LOSSES.
The logic is the same, in fact, because as the value that can be negotiated with a given investment is multiplied, so are the results, positive and negative.
In this sense, the ideal is to always work using only a small part of the available margin, in case there is a market change, high losses will not occur.
Let’s look at an example of a FOREX operation with leverage (margin).
In this example, if the investor had actually bought euros (1.0500) and then sold (1.0550) when they appreciated, they would have obtained a modest return (less than 0.5%, that is, US $ 400 in US $ 105k).
In addition, it would have been necessary to disburse US $ 105,000, an amount beyond the reach of the vast majority of individual investors.
However, thanks to the possibility of operating on margin, the investor may have disbursed much less.
If the required margin is 0.5%, or a ratio of 200: 1, in the example above the operation of approximately US $ 100 thousand could have been carried out with the deposit of only US $ 500.
Thus, if it were necessary to invest the entire principal amount in the purchase of the coins, and considering the variation between them, the gross result in the example in the table above would be less than 0.5%.
However, if the investor was able to buy the EUR / USD lot with only US $ 500, the result achieved would represent a gross return of 80% in the same period.
BUT THE LOSS COULD ALSO HAVE BEEN 80%. That is, if the EURO valuation forecast did not materialize, the margin of US $ 500 would be reduced to US $ 100, with a loss of US $ 400.
This market, in fact, has a high appreciation potential due to this leverage (margin).
But you should always keep in mind that it is preferable to trade small lots (micro lots or mini lots), and thus have less profits, but in this way considerably reduce the risk associated with your account.
For those who have no interest or time to learn to trade in this market, letting the management be done by a professional turns out to be an excellent solution.
You only pay when it shows results.
In practice, it is not you who pay, but the profits generated by it that pay you for the work.
This way you can have interesting results.
Usually well above what is offered by time deposits and other more traditional investments.
What are FOREX Robots?
Automated systems, called EAs or Robots, are increasingly out of fashion.
With Robots , everything is done automatically in your account.
This solution for those without knowledge is one of the most used.
Currently a large chunk of all operations carried out in this market today, or are carried out entirely via these Forex Robots.
Another widely used tool, especially for those who are new to FX and prefer to have a tool that helps to find the best trades, are the Signals.
Many of those that exist are very similar to Robots, but while the former do everything, in the account, that is, they look for the best operation and place it on the platform, the signals do not operate.
That is, the Signals seek negotiations, trades, but do not put them in the operation.
They only notify the person, whether by email, application or other means, that they have found an operation on a certain asset, whether it is for purchase or sale and sometimes also say what is the best value for take profit and stop loss.
But it is the person who has the final decision to place the sign.
Brokers are the companies that provide the possibility for you to trade in this market.
They usually offer platforms and access to the foreign exchange market and have corresponding regulations.
However, not all brokers are like that.
It is important to understand the types of Forex brokers that exist and how they work.
Read here about Forex brokers.
There are two types of platforms used in FX trading.
Metatrader 4 and 5 platforms (MT4 and MT5), which in my opinion are the best platforms to trade in the foreign exchange market.
And the internal platforms that each broker uses.
Some offer both platform options.
Is Forex Safe?
The Forex market has existed since 1971 and is a market regulated by several regulators, some of which are the most important in the world.
However being safe should not be confused as it is safe that you do not lose money.
All investments have risks and the foreign exchange market, even due to the leveraging, has even higher risks.
So it is a safe market because it is regulated, but not safe because it guarantees profits.
However, there are brokers that offer their services without regulation or with exclusive regulation in Offshore areas (tax havens).
Although not all of these offshoring brokers are fraudulent, you have to be careful.
One of the advantages of using a regulated broker, for example in Europe, is that they have several mechanisms to defend clients.
In addition, European-regulated brokers have a number of obligations that serve to protect their clients’ money.
So yes, Forex is safe, if our broker is also safe.
When we say that Forex is safe, it does not mean that you are certain to make a profit.
Profits depend on how you trade, or what tools you use to make a profit.
Can I trade Forex in South Africa?
There is no specific regulation for Forex, but a global regulation for the various products within the same segment such as CFDs, Binary Options and others.
For this reason, the foreign exchange market is regulated in South Africa. The entity that regulates financial products in South Africa and which in this case supervises is the Financial Sector Conduct Authority (FSCA).
Forex or Binary Options, which is better?
These are two different markets that work differently.
But they have one thing in common, the most used assets in Binary Options, are Forex assets.
So it is normal for you to try one market, end up trying the other.
In my opinion Binary Options are easier to understand for those who are new to this world of online trading and trading.
This is because Binary Options are basically betting on rising or falling prices and the way of calculating profits is much simpler.
You can even try a free platform that offers both investment models, so it will be simple to test for free using a single platform and a single application.
Here is a summary of what Forex Trading South Africa is:
- Financial instrument with the highest worldwide turnover.
- Internationally regulated since 1971.
- We do not buy assets but trade in currency pairs.
- Investments are made in exchange movements between 2 currencies.
- It is a leveraged market. Leverage can go up to 1: 1000 or more.
- Leverage allows for high returns, but greater risks.
- Forex is legal in South Africa, through online brokers that operate outside South Africa.
- The most well-known platform is Metatrader (MT4 and MT5).
FAQs – Frequently Asked Questions about Forex
Forex market what is it?
Forex or foreign exchange market is a regulated financial market where we do not buy any assets, but we trade in the relationship of two currencies with each other. So-called currency pairs. Trading works in both directions, buy or sell, so we can bet on the decline or appreciation of one currency against the other currency in the pair. Example EUR / USD.
How does Forex work?
This market is open 24 hours from Sunday night until Friday night, closing at the weekend. It is necessary to have an account on a platform and broker that offers this type of trading. The operation is simple, as its assets are always currency pairs and there are many. See the example with EURUSD to understand how it works.
How to operate in the foreign exchange market?
The forex operation takes place by buying or selling a Pair. After choosing the pair, you have to decide which currency you value in the pair, and that determines whether it goes into buying or selling. Then choose the lot, because here we negotiate in quantity, the base being 1 lot. You must also determine what profit you want to have in the operation you are opening.
What are brokers and which are the best?
Brokers are companies that offer trading platforms to be able to operate in this market. Some care is needed when choosing one because some are regulated and others are not.
Is Forex Safe?
The foreign exchange market has been regulated since 1971. So it is safe, however there is a lot of care to be taken, from choosing the right broker, the way you deposit, and of course how you trade, because being safe does not mean that you are going to make a profit