Forex Trading South Africa has become increasingly popular among South African citizens. Although Forex trading SA is a very risky business, it still attracts thousands of Forex traders in South Africa. Most of the people around the world are interested in Forex trading because it is now a very lucrative and profitable investment. However, it is also possible that a person may lose his investment in Forex trading. The Foreign Exchange market indeed spreads the whole world. Forex trading in South Africa is also increasing. Many Forex South Africa platforms are coming into existence to fulfill to trade in the foreign exchange market.
Interestingly, due to the high demand for currency trading, such Forex trading is legal in South Africa. Thus, Forex in South Africa has achieved a new dimension to provide the best to South African citizens. Forex trading SA, though a little bit complicated to invest at the first try, it is effortless if a person learns properly how to trade Forex. Yes, you indeed need some background knowledge about how Forex market works in South Africa.
To make the complicated trading forex easy, we try our best to deliver you the best knowledge we can about Forex trading South Africa. Just follow our tips and guidelines. You will surely be an expert forex investor. This guide aims to provide the necessary information on Forex trading SA. People from all over the world will be benefited from our guide. However, we tried our best to outline the best guide for Forex trading in South Africa.
Best Forex Trading Brokers in South Africa
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What is Forex Trading?
Forex (Foreign Exchange) or Forex trading designates the market where people trade monetary currencies. The Forex exchange market is now one of the most growing demands in the world. Since there is no central market place to exchange currency, Forex, therefore, is beyond the boundary market that is dynamic in the leading international financial centers (Paris, London, Tokyo, Cape Town, New York, Sydney Zurich, Hong Kong, Frankfurt, and Singapore). Being the most popular market place, trading forex has a special place in South Africa Forex Trading.
Forex, the most significant economic market in the globe with a daily trading volume estimated at nearly 5.3 trillion dollars, is thus the largest and most liquid marketplace in the globe in terms of transaction volume. Unlike the stock market, Forex Trading in South Africa allows you to communicate in the market to place orders 24 hours a day and 5 days a week (banks are closed on weekends). Forex trading SA has long been reserved only for wealthy people, but for several years a private individual can get started with a bet of only a few tens dollars.
What Is Forex Trading Market?
The foreign exchange (FOREX) market is the marketplace where all the participants determine to buy currency against another. In financial jargon, Forex Trading is often used to refer to the foreign exchange market. Besides, this Forex trading , especially currency trade, is a revolutionary platform to earn through trading currency. Forex Trading SA is also a vast market for Forex Trading.
Understanding Currency Pairs
The first thing a trader must do, whether speculating in the Forex market or binary options trading is to choose the currency pair on which he will invest his money. It is just a currency trading. You are selling one currency because you are buying another currency. To trade, we need to clarify what a currency pair is. It is a trading instrument used to buy a currency and sell a second simultaneously. The currency pairs are presented in this way:
EUR / USD, GBP / USD, EUR / JPY. So when we buy the EUR / USD currency pair, we are, in fact, buying the euro and, at the same time selling the US dollar.
One of the other questions that need to be clarified when we discover forex South Africa, and that will help us understand this activity much more quickly, is that of the base currency as well as the counter currency. The first money that makes up the currency pair (left currency) is the base currency, and the second one (right currency) is called the counterpart currency, so on EUR / USD, the euro is the currency base, and the US dollar is the counterpart currency. Interestingly, the currency of South Africa (the Rand) also has a prominent role in Forex market. Even people from other countries are buying South African Currency in exchange of different currencies. Thus Forex Trading in SA is marching forward in a triumphant smile.
The Main Forex Currency Pairs
- USD / JPY (US Dollar / Japanese Yen)
- USD / CHF (US Dollar / Swiss Franc)
- USD / CAD (US Dollar / Canadian Dollar
- GBP / USD (British Pound / US Dollar)
- NZD / USD (New Zealand Dollar / US Dollar)
- EUR / USD (Euro / US Dollar)
- AUD / USD (Australian Dollar / US Dollar)
Forex Trading in South Africa
South Africa, one of the most established economies on the African continent, is the only state in this region to be a member of the G20 international economic cooperation forum. The South African Reserve Bank monitors the sophisticated financial structure of the country.
Global economic conditions strongly influence the local economy due to the country’s heavy dependence on foreign trade. Rich in natural resources, South Africa is one of the leading exporters of precious and base metals. Forex trading in South Africa has become extremely popular with locals in recent years, mainly due to the country’s liberal economic environment. South Africa has the largest forex market on this continent, with a daily trading volume of more than US $19 billion in 2017, according to information released by the Bank for International Settlements.
For comparison, forex traders on the continent’s second-largest market, Namibia, recorded a daily trading volume equivalent to one-tenth that of South Africa for the same period. The South African rand is the twentieth most traded currency in the world and is predictable to remain to improve in the upcoming. With the tightening of European regulatory frameworks and the reduction of debt ceilings, an increasing number of forex brokers are starting to take an interest in the South African Forex market.
Is Forex Trading in South Africa Legal?
Forex trading in South Africa is legal and is enjoying increasing popularity among residents. The local regulatory authority oversees the foreign exchange market. The Financial Services Conduct Authority (FSCA), whose main objectives are to defend market participants, ensure fair, easy, and smooth trading conditions, and prevent illicit activities like money-laundering.
Foreign brokerage organizations must have permission from the FSCA, and then they can legally offer their services on South African soil. However, Forex brokers in South Africa must cover the minimum capital requirements of the regulatory body and be headquartered in South Africa.
Licensees can offer a wide range of derivatives, including currency trading, commodity, interest rate, and equity derivatives. The supply of derivative products is regulated by the law on the financial markets of 2012, which has been subject to several modifications over the years.
Although South African residents are not prosecuted for trading on offshore websites, it is still recommended to choose a broker with local FSCA authorization. If you insist on joining a brokerage firm licensed abroad, you should at least make sure that the company of your choice is adequately regulated by the laws of a recognized jurisdiction such as Cyprus, for example.
Another thing worth considering is the funding of his trading account, which is much easier for those who join FSCA regulated brokers. It is recommended that those who negotiate with foreign brokers open offshore bank accounts. It is easier to arrange payment by bank transfer than using a locally issued credit card due to the complex laws that govern the transfer of cash to foreign institutions. It is also essential to make sure that your broker, whether or not locally approved, allows you to open an account whose base currency is ZAR. Otherwise, you may face a conversion charge.
How to Open A Forex Trading Account
Funding your trading account from South Africa is a relatively simple process, provided you use a credit card or an account with a large local bank. That said, the country’s financial regulations can sometimes be a barrier if trying to fund an international account from its national bank account or using a lesser-known credit card. However, such problems have been less frequent in recent years. The measures aim at reducing illegal activities such as money laundering. However, since there are uncomplicated scopes to overcome the barrier, Forex trading in South Africa is a fully grown-up foreign exchange market.
South African Forex Traders should keep in mind that there are restrictions on the amounts they can transfer abroad. Each citizen of the country cannot transfer more than 10 million rands a year abroad for foreign investment. To do this, you must file a tax exemption certificate. There is also a discretionary allocation of foreign currency of up to R 1 million, which does not require a tax relief certificate.
South African forex brokers accept a variety of popular financing solutions that you can use to transfer money to your trading account. Electronic wallets like Skrill, PayPal, and Neteller are among the most practical options. They can help you work around the issues that sometimes arise from paying by credit card or bank transfer.
Some brokers operating in this market allow South African forex traders to process payments with EasyEFT. It is a relatively new online payment system that will enable you to transfer money directly from your online bank account. This solution is inexpensive, practical, and does not require a credit card.
Depositing your account is extremely simple and quick with EasyEFT. Simply log into your forex trading account, navigate to the payment system, and click on the method, if available. Next, you need to choose your bank from the list of supported financial institutions and follow the instructions to complete the payment process.
The money transfer is made via your bank’s online payment platform. This makes EasyEFT an exceptionally safe method to use on best Forex trading SA sites. Some of the local banks that support the EasyEFT system include Capitec, FNB, ABSA, Standard Bank, and Investec.
Another advantage is that payments with EasyEFT can be made in ZAR. Some brokers in SA also work with other locally available methods, such as PayFast and PayU. Before registering with a broker, make sure that it supports the banking solution that you intend to use. Check if a processing fee is in place.
Understanding Forex Exchanging Trade Charts
This Forex Graph Chart is very simple. It is indeed a line built on each fence. You can easily understand the general movement of the price of currency pair over a given time horizon. Thus you can easily understand the currency trading current rate in Forex Trading South Africa.
A Graph Chart On EUR / USD
A Bar chart though a bit complicated one than the graph chart indicates the opening and closing prices. However, it also shows the lowest and highest. The end of the vertical bar projects the most economical price traded during a specific period. On the contrary, the top bar shows the uppermost rate. The vertical bar specifies the amplitude of exchange on all of this quote. Besides, the left of the horizontal dash shows the opening price. And the right touch demonstrates the closure rate. Many forex brokers in South Africa provide amazing apps from where you can analyze such bar graphs for Forex trading in South African Forex Exchange Market.
A bar chart on EUR / USD
A bar indeed signifies a subdivision of time (day, week, or hour). Always keep in mind that a bar refers to the time unit.
- Opening: The left of the horizontal line denotes the opening price.
- High: Vertical line’s top outlines the uppermost rate during this quotation period.
- Bottom (Low): Vertical’s line bottom outlines the bottom-most during this quotation period.
- Closing (Close): The right horizontal line indicates the closure price.
The Japanese candlestick setup gives the exact rate info as the bar graphs, however, in a noticeably more clear and also a lot more classy style in the forex exchange market. It additionally specifies the highest as well as the cheapest of each rating. However, the representation in the form of candles offers a block (body) showing the amplitude of the motion between the closing and also the opening. As a whole, if the center block is colored white or red, after that, the currency set has certainly shut less than when it opened up. In the instance below, the fill color is black. For every block, the top represents the opening cost, and also all-time low represents the shut rate. If this closure price is upper than the opening rate, then the central slab will undoubtedly be “white” or green, and even clear.
Here is an example of a configuration in Japanese candles on a EUR / USD chart. Isn’t it adorable?
The objective of the graphical representation in Japanese candles is to favor visual analysis since it is precisely the same information appearing on OHLC bar diagrams.
How Does Forex Trading Work?
The operation of Forex Trading in South Africa is quite simple, although, for the first few moments, it can be puzzling. In Forex trading, one buys a currency and simultaneously sells another. It is because currencies are itemized as well as dealt in pairs. For instance, EUR / USD is specifically a currency pair that comprises the euro as well as the USD. While trading on EUR / USD, it indicates that you purchase one. On the other hand, you sell the other one.
How? It is very easy and simple.
- Purchasing the euro and selling the dollar if the euro is estimated to reinforce in the EUR / USD pair
- By selling the euro and purchasing the USD if the USD is expected to reinforce in the EUR / USD pair
To operate on trading, long (upward) or Short (downward) positions can be opened. In the case of EUR / USD, you can open a Long Position if you wish to “bet” on the Euro, or a Short Position if you wish to a strengthening of the currency. The same mechanism applies to all currency pairs. Each duo is, in fact, made up of 2 currencies:
- The base currency
- The quoted currency (or “counter”)
The purchase and sale price of the base currency against the mentioned currency are formed on the market. When you view a graph of a currency pair, you will see the “BID” price, which is the purchase price of the base currency against the quoted one. The dissimilarity between the BID and ASK is called SPREAD, and it also measures the cost of the broker for his brokerage service. The terms- BID and Ask are not complicated one if you understand well, the SA people who are interested in Foreign Exchange Market investment.
Advantages and Disadvantages of Forex Trading
Advantages Of Forex Trading
- A market accessible 24 hours a day, which offers the trader more flexibility in the choice of working hours.
- It has excellent leverage, which allows experienced traders to multiply their gains significantly.
- It is an excellent alternative for novice traders who do not necessarily have large sums of money to invest like other expensive financial products such as stocks, as an example.
- The existence of demo accounts allows beginners to understand the operation of the various online forex brokers South Africa without the need to jeopardize their own money.
- The trader has the possibility of having access to several developed trading platforms, which provide him with technical tools and allow him to analyze currency prices strategically.
Disadvantages Of Forex Trading
Forex trading is an investment that can prove to be very profitable certainly. However, like any other commotion, it also has drawbacks that every trader must take into account well before rushing to trade. It is a very unstable market. Besides, it also has extraordinary uppermost leverage. This can occasionally be exciting. However, keep in mind, it is also, to some degree, dangerous that can reason for the loss of a massive amount of money and bring your monetary devastation in a very short time.
Forex Trading Tips
Forex is an open market without special skills. Easy to understand basics are necessary to be able to earn profit as a Forex investor. On the other hand, Forex operations hold a lot of surprises and traps, errors, and losses are almost inevitable. Experience and the application of a strategy are essential. Keeping in mind, especially for the Forex Trading South Africa, here are the best forex trading tips for you. Anyone from any country who are interested in Forex trading in SA can follow these tips.
Acquire a good trading base
The introduction to Forex trading is undoubtedly the most challenging stage, but the control of the various kinds of operations develops with experience. It is necessary to start by gathering the maximum of information on the market to facilitate this step, before actually launching and favoring fictitious training before investing real money.
Understanding the Forex market
It is essential to understand the system to know its origin, which goes back in particular to the Bretton Woods agreements. Forex is a huge market where stocks have a macroeconomic impact.
Practice blank on demo platforms
It is possible to practice Forex trading in SA without investing real money by accessing demonstration platforms offered by most forex brokers. Investing in Forex can indeed be done by yourself or through an intermediary who will make sales and purchases according to the instructions of an investor. This intermediary, called a broker, is a specialist in the currency market.
His choice is crucial, working with a broker with a demonstration platform; you just need to open a demo account to practice. It should also be chosen with care, taking into account the recommendations on it because there are many scammers online. A demo account is useful for discovering the world of Forex, but it is also advisable to keep this account and to practice even in parallel with real practice. The majority of professional traders have trained for months on a demo account before investing real money.
Be careful with the right strategies
The caution is a watchword in this universe. It involves investments measured, reasonable, planned, and devoid of emotions. Concretely, Forex trading SA is a profitable market but it also makes you lose money, the objective being, of course, to gain more than to lose. You should know that the chances of winning increase with experience, but the more you invest, the higher the risk of loss.
Investing by setting limits
Two limits must be set by the Forex trader, a limit on the amounts to invest, and also a limit on the profits to be achieved. First, you should not invest more than 2 to 5% of your capital. Besides, it is advisable to set a limit before even starting to invest. To expect big profits immediately and efficiently is also an illusion. On the other hand, making small profits regularly generally leads to an outstanding result.
Manage your emotions
When doing Forex trading SA, you have to be financially and psychologically prepared to lose money too. Emotions are terrible since you should not invest in intuitions or be stubborn enough to recover your losses immediately. However, neither should you have too much self-confidence, nor should you worry too much. On the other hand, humility is a valuable asset because it is essential to learn from your mistakes. Since losses are almost inevitable, so are errors.
Graphical analysis and trading plan
Currency fluctuations are random and depend on many factors, such as the political, economic situation, unemployment rate, etc. However, there is still a dominant market trend. Either it is bullish, it is bearish, or it is neither bullish nor bearish, better known as a range-bound trend. To see the direction of a currency, you have to stay informed, collect data, and perform analyzes based on reading graphics. For each type, of course, you must build a trading plan, a careful and thoughtful method to optimize the chances of making a profit.
Forex Trading South Africa FAQs
Get answers to the most commonly asked questions surrounding Trading Forex in South Africa.
What should Forex traders in South Africa pay attention to when choosing a broker?
First of all, Forex traders in SA should be alert to unregulated and shady forex brokers in South Africa. Some companies have got into the habit of deceiving gullible customers with their money. The FSCA has warned against these forex brokers on numerous occasions. This does not mean that you are legally required to join an FSCA regulated brokerage firm. Just make sure that site operations are overseen by a recognized regulatory body like CySEK, for example. Watch out for excessive leverage because it goes both ways, and you could end up with huge losses. Even if prices move against you by just a few points, leverage can wipe out your entire balance.
What currency pairs does the ZAR belong to?
The South African Rand (ZAR) attracts many traders because of the fluctuations and volatility it offers. The two most popular pairs are USD / ZAR and GBP / ZAR. Of course, local traders can always opt for more exotic currency pairs that contain ZAR, such as NZD / ZAR, AUD / ZAR, and CHF / ZAR, among others.
Do I have to report my Forex Trading earnings?
Yes, forex income is taxable in South Africa just like your regular income, that is, you must complete a personal income tax form. Tax rates can vary between 18% and 40%, depending on profits. It is recommended that traders who do not know how to report their earnings they should consult a tax professional.
Do I have to pay brokerage fees?
It depends on the broker’s policies and the instruments you trade. Reputable South African forex brokers do not charge their clients to facilitate their forex operations. This is not necessary, because the costs are included in the spreads (the difference between the bid / ask price). However, additional commissions are generally charged when you buy or sell stocks. Some forex brokers charge inactive traders for maintaining their dormant accounts. Withdrawals by specific payment methods are also subject to processing fees in some cases.
Is there any age limit to trade legally in Forex in South Africa?
South African must be at least 18 years old to open a live account and start making investments in Forex South Africa. This is the minimum age compulsory by most brokerages. Citizens of this age can transfer money abroad without the consent of a parent or guardian.