Forex Trading in South Africa (For Beginners)

🌎 Country	🇿🇦 South Africa
📌 Current Traders in South Africa	450 000+ ( Updated 2024 )
📉Most Traded Currency Pairs	USD / EUR - USD / GBP
⚖️ Is Trading Legal in South Africa?	✔️ Yes
🔎Brokers with ZAR accounts	AvaTrade, Exness, HFM, Plus500, IFX Brokers, SuperForex, JustMarkets, XM, Global GT, Trade Nation, easyMarkets, FXCM, Khwezi Trade, FxPro
🏆Top FSCA Regulated Forex Brokers	🥇 Exness, AvaTrade, HFM, IFX Brokers
💳 Funds Needed to Start Trading	R1600 ZAR or $100 USD
📈 Fastest Growing Low Spread Broker in South Africa*	Exness

Quick Important Facts about Forex trading in South Africa:

 

1. Forex and CFD Trading in South Africa is 100% legal and is regulated by the FSCA (Financial Sector Conduct Authority) which is the financial and securities governing body in South Africa. The FSB now known as the FSCA authorizes offerings of Derivative instruments to traders in SA.
2. Forex trading is lawful when trading with a regulated, legitimate and licensed ODP (Over the Counter Derivative Provider) broker.
3. An average of around USD 27 billion / R 530 817 030 000 ZAR is traded every day in the South African FX Market (Updated 2024*) making South Africa the second biggest forex market behind Nigeria.
4. You need around $100 or R1800 to start forex trading in South Africa.
5. Forex trading is expected to grow by 27% in 2024 in Southern Africa.
6. The biggest retail forex broker in Exness with around 4 trillion dollars traded in April 2024 -👉 Sign Up Now Here

So, if you’re ready to go “all in” with Forex in South Africa for Beginners…

Let’s dive right in…

In this in-depth guide, you’ll learn:

What is Forex Trading – Overview

Forex Trading is a network of buyers and sellers, who transfer currency between each other at an agreed price.

It is the process of speculating on currency and commodity prices to potentially make a profit.

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Forex, which is also commonly referred to as FX, is a decentralized global marketplace where all the world’s currencies trade with one another.  What makes Forex so appealing is that it is one of the most liquid markets in the world with average daily trading amounts exceeding $5 trillion.

 

South Africans can legally trade in the foreign exchange market via any FSCA-regulated forex broker authorized to offer Derivative instruments to traders in South Africa

 

In South Africa, more than 25 Billion US Dollars ( approximately R426 940 500 Billion Rand ) get traded daily.

 

 

A simple analogy to help potential traders understand FX trading is looking at a retail store that sells its products at a low-price because the store buys in bulk.  The process of the store turning over a large number of items to their customers is essentially seen as  “liquidity” in a “liquid market“.  The Store makes a profit from the low price and the low pricing ensures that their clients come back to shop for more.

In previous years Forex was a rich man’s game that was only practiced by wealthy investors and large firms.  However, after online trading platforms took over the markets, Forex trading has become accessible to any retail or individual investor.

 

Currency Trading – How it Works

 

Currencies are traded against each other as forex pairs,  for example, USD/ZAR. Currency trading is generally facilitated by global and central banks, with central banks being the core element of the Forex Market.  A Forex trader will buy and sell currencies with the main aim of making a profit.  A profit or loss is the difference between the buy and sell rates of the currency pairs traded.

 

Essentially Forex is all about attempting to speculate on the fluctuating currencies between two different countries, as mentioned ith the example above – USD: United States Dollar $ and ZAR: South African Rand R. These two currencies are usually referred to as ‘currency pairs’ and these pairs are made up of the base currency and the quote currency.

 

The first currency (USD in this case) set that appears in the Forex pair is referred to as the base currency and is the currency bought or sold for the quote currency.

 

Some of the most popular major currency pairs include EUR/USD, USD/JPY, GBP/USD, and USD/CHF.

 

 

Forex Trading Risks

 

Any type of trading has its own risks and fx trading should not be approached lightly.  Potential traders should arm themselves with all the knowledge, tips, and expert advice available. The main risks include the following:

 

Counterparty Risks

The risk that the counterparty to a financial deal, such as a trade or a loan, would be unable or unwilling to fulfil its obligations under the contract. This may occur for several distinct reasons, including default, insolvency, or a change in credit ratings.

 

Because many forex transactions are done between huge financial organizations that may be in danger of failure or bankruptcy, counterparty risk may be a significant worry in this industry.

 

Many traders employ forwards, futures, and options to move counterparty risk to another party. Traders can also utilize collateral, such as cash or assets, to guarantee their counterparty’s performance.

 

Trading with Unregulated Brokers

The interbank market is highly regulated, however, Forex instruments are not standardized, and in some places around the world, Forex trading does not fall under any form of regulation.

 

Forex Brokers are regulated to undergo regular audits, communicate certain changes of service to their clients, and much more. This ensures that currency trading is ethical and fair for all involved.

 

Country Risks

Country risk, commonly referred to as sovereign risk, is the risk that a country may be unable or unwilling to satisfy its financial responsibilities, such as repaying debt or upholding trade agreements. 

 

This can occur for several causes, including political instability, economic recession, and changes in government policy. In addition, country risk is a worry in forex trading since it can impact the value of a country’s currency, which can affect the value of positions held in that currency.

 

The country’s risk can be quantified in several ways, including by analyzing a country’s economic statistics, political stability, and credit rating. 

For instance, if a country has high inflation, poor GDP growth, and political upheaval that results in a downgrading of its credit rating, this might reduce the faith and confidence of investors and traders to hold positions in this currency or invest in this country, resulting in currency depreciation.

 

To manage country risk in forex trading, traders can use a range of tactics, including the following:

• Diversifying their portfolio by investing in several currencies.
• Using financial derivatives such as options and futures to hedge against currency volatility.
• Closely monitoring political and economic events in the countries in which they trade.

 

Transaction Risks

Transaction risk in forex trading refers to the possibility of incurring a loss due to different circumstances that may influence the execution of a currency deal. These issues include technological faults, communication breakdowns, trade execution mistakes, or fraud.

 

The speed and dependability of the trading platform and internet connection constitute one of the most prevalent transaction risks in forex trading. 

 

Platforms and internet connections can malfunction or be sluggish, resulting in delayed trade execution or the inability to execute transactions. This is especially troublesome in volatile market settings when prices vary frequently.

An additional typical risk relates to the correctness of the order execution, pricing, and quantities of the deal. Errors in submitting trade data may result in substantial losses.

 

Communication errors might also contribute to transaction hazards. For example, if a trader puts an order with a broker, but the broker executes the deal incorrectly, the trader can incur substantial losses.

 

Leverage Risks

In forex trading, leverage risk refers to the risk of loss that may arise as a consequence of leveraged trading, which is the capacity to manage a considerable amount of money on the market with little capital. 

 

Leverage enables traders to take greater positions than they could with their funds alone, but it also raises the possibility of incurring losses.

 

A slight change in the value of a currency pair can result in a huge profit or loss when trading with leverage since the transaction is multiplied by the amount of leverage utilized. 

 

When the market moves in the trader’s favour, the winnings will be increased by the amount of leverage utilized. Still, when the market goes against the trader’s forecast, the losses will be multiplied comparably.

 

Leverage trading can also be risky, as traders could feel empowered by their ability to handle a huge sum of money with a modest initial investment. This may lead to overtrading or taking up too many positions simultaneously, which is perilous when market circumstances shift abruptly.

 

Interest Rate Risks

In forex trading, interest rate risk refers to the risk of loss from fluctuations in interest rates. In the foreign exchange market, interest rates play a crucial role in determining currency prices. 

 

When a country’s interest rate is greater than the interest rates of other nations, demand for that country’s currency will grow, resulting in a rise in its value. 

 

When a country’s interest rate is lower than the interest rates of other nations, demand for that country’s currency will diminish, resulting in a decline in its value. There are two kinds of interest rate risk:

• Monetary policy risk is the risk that a central bank’s interest rate policies may cause fluctuations in the value of a currency.
• The yield curve risk is the risk that changes in the yield curve’s form will lead to fluctuations in currency prices.

 

The interest rate risk may also be mitigated via financial derivatives, such as futures and options, which enable traders to lock in a fixed interest rate for a specific time and protect themselves against interest rate fluctuations. 

Furthermore, traders should closely monitor announcements of interest rate changes and other monetary policy decisions made by central banks and modify their positions appropriately.

 

 

The South African Forex Market – At a Glance

South Africa’s foreign exchange market (Forex) is a decentralized marketplace where buyers and sellers may trade currencies. 

 

It is a worldwide market in which South Africa is a modest but active player. On the foreign exchange market, dealers purchase and sell various currencies to benefit from variations in exchange rates.

 

According to statistics, the Foreign Exchange Reserves in South Africa averaged 54,221 billion USD in 2022, with an all-time high of 60.57 billion USD in December 2022. 

 

The increase was primarily driven by the inflow of funds from foreign borrowings amounting to USD 318 million from the French Development Agency, the rising price of gold measured in US dollars, and adjustments due to the weakening of the US dollar and changes in asset prices. 

 

Furthermore, these factors were partially balanced out by payments made in foreign currency on behalf of the government.

 

In addition, the bulk of the South African forex market’s trading activity occurs between banks and big corporations, although retail traders and private investors also engage.

 

The South African Reserve Bank is responsible for carefully monitoring the foreign exchange market and adopting market-governing laws. To stabilize the market during moments of volatility, the bank also engages in the market as a lender of last resort and market maker.

 

Below are a few interesting facts regarding the South African Forex Trading Market:

• South Africa’s foreign exchange market is insignificant compared to other major forex markets, such as London and New York, yet it is dynamic and expanding.
• The South African Reserve Bank is responsible for carefully monitoring the foreign exchange market and adopting market-governing laws.
• In 2024, South Africa’s forex trading volume, including contracts for difference (CFDs) and spot trading, comprises more than 25 billion USD per day.
• The South African Rand (ZAR) is among emerging markets’ most frequently traded currencies.
• Several significant financial organizations, including the Johannesburg Stock Exchange, the Futures Exchange, and the Financial Services Board, assist the foreign exchange market in South Africa.
• The Financial Sector Conduct Authority (FSCA) of South Africa regulates forex trading and has the right to grant licenses to qualified financial service companies.
• The Forex market hours are 24 hours a day, five days a week, making it accessible to traders worldwide.
• South Africa’s foreign exchange market is very volatile, making it dangerous, particularly for novice traders.
• FX trading has grown in popularity in recent years, especially among young South Africans who view it as a way to create cash and improve their financial literacy.

 

What drives the Forex Market?

 

Central Banks

On a macro level, central banks and their interest-rate choices affect exchange currency values the most. 

Overall, if a central bank raises interest rates, it suggests that their economy is expanding and they are optimistic about the future; if they lower interest rates, it means that their economy is contracting, and they are pessimistic about the future. 

This style of depiction might be unnecessarily simplistic, yet central banks often use it to adapt to changes in their economies.

Furthermore, capital flows are major drivers of interest rates and asset values, including the exchange rate, which in turn impacts the amount and price of a trade and the overall price level through exchange rate pass-through.

Another factor that traders must remember is that Central Banks and Central Bank Policy go hand-in-hand. Furthermore, central bank policy promotes and maintains price stability and economic growth. Therefore, to achieve goals, central banks use these policies to control:

• Interest Rates

• The rise in inflation
• Money Supply
• Reserve Requirements over banks
• Lending Reserves to commercial banks
• The interest on reserve balances that the country’s commercial banks hold

 

Fear and Greed

Fear may transform a falling instrument into a full-scale panic, while greed can transform a rising market into a reckless buying frenzy.

 

News

Both planned and unplanned news could influence the market in really brutal ways. But on the other hand, scheduled news is revered by many investors and may predictably impact markets. 

 

For example, employment statistics from large financial centers tend to affect markets more than manufacturing sales reports, while retail sales figures agitate markets more than money supply reports.

 

The Economic Calendar is an excellent resource for determining which news has the greatest impact. 

 

While not all key news items, such as a Non-Farm Payroll announcement or a central bank monetary policy decision, move the needle when their number is called, they have the highest possibility of doing so.

 

Therefore, knowing when the markets will move may be one of your most valuable advantages as a trader.

 

Economic Statistics

Economic reports provide the foundation of a forex trader’s strategy. Therefore, keeping an economic report schedule is essential for remaining current in this fast-paced economy. 

 

Gross Domestic Product (GDP) is the most apparent economic indicator since it represents the foundation of a country’s economic success and strength. 

 

GDP measures an economy’s total production of goods and services. However, it is important to note that GDP is a lagging indicator. That is, it reports on already occurring events and patterns. Inflation is another important indicator since it signals rising prices and declining buying power. 

 

Inflation, on the other hand, is a two-edged sword. Many believe it puts downward pressure on a currency due to declining buying power. 

 

Inflation can also cause currency appreciation since it forces central bankers to raise interest rates to combat growing inflation. However, inflation is a contentious subject among economists, and its consequences on currencies are seldom simple.

 

 

Forex Terminology that all South African Traders must know

Below is a quick overview of terminology Forex traders will come across in their trading journey. It is extremely important to understand the language spoken in the forex market, as any misunderstanding could cost an investor dearly.

 

Forex Quotes

A forex quote is a numerical value that demonstrates the relative worth of one currency in comparison to another. Forex quotes are commonly presented as a pair, where the base currency is the first listed, and the quote currency is the second.

Forex Instruments

A forex instrument, also known as a currency pair, is a financial product allowing traders to buy or sell one currency against another. 

 

The value of the forex instrument is determined by the relative value of the two currencies, as quoted in the foreign exchange market. Examples of popular currency pairs include EUR/USD, GBP/USD, and USD/JPY.

Forex Charts

A forex chart is a graphical display of historical exchange rate information for one or more currency pairings. Traders and investors use it to study trends, detect patterns, and make judgments on the purchase and sale of currencies. 

 

Forex charts can be created using several types of data, including the following:

• Tick data (the price at a specific point in time).
• Open, high, low, and close (OHLC) data (the price at the beginning, peak, and end of a specific period).
• Candlestick data (a combination of OHLC data and other information represented as a candlestick pattern).

Technical Analysis

In forex trading, the technical analysis includes evaluating historical market data, typically price and volume, to find patterns and make trading choices. 

In addition, technical analysts use charts and indicators to forecast future price fluctuations. The premise of technical analysis is that market patterns tend to repeat themselves, as shown by charts.

Some specific technical analysis techniques that are useful for forex trading in South Africa include:

Volatility-Adjusted Technical Indicators

Standard technical indicators often struggle in highly volatile markets, generating false signals and obscuring potential opportunities. Enter volatility-adjusted indicators, which adapt their calculations to the current market turbulence. Some common examples include:

• Bollinger Bands with ATR width: Instead of using a fixed deviation for the bands, they adjust based on Average True Range (ATR), a volatility measure. Wider bands in volatile times offer more breathing room, while narrower bands signal calmer waters for tighter entries.
• Fractal Adaptive Moving Average (FRAMA): This dynamic average adjusts its smoothing factor based on volatility, reacting quickly to trends in choppy markets while smoothing out noise during calmer periods.
• Keltner Channels: These bands adapt to volatility and volume, expanding when sentiment is high and contracting during periods of low volatility, offering insights into potential breakouts and consolidation zones.

Using volatility-adjusted indicators adds a layer of dynamic analysis, aiding in making informed decisions even in turbulent market conditions.

Volume Analysis

Beyond price movements, volume plays a crucial role in understanding market sentiment. High volume during upward trends confirms the strength of the move, while low volume can signal a weakening rally or a potential reversal. Divergences between price and volume can also be telling. An uptrend with falling volume might indicate waning momentum, while a downtrend with rising volume could foreshadow a potential reversal.

Analyzing volume alongside price action enriches your technical analysis, providing valuable insights into market conviction and potential turning points.

Oscillator Indicators

Oscillators like the Relative Strength Index (RSI) and the Stochastic Oscillator fluctuate between specific ranges, indicating overbought/oversold conditions and possible trend reversals. While useful in trending markets, these indicators can generate false signals during periods of high volatility.

Advanced oscillator variations like the Chaikin Money Flow and the Awesome Oscillator incorporate volume data, offering a more nuanced picture of momentum and potential trend exhaustion. Remember, oscillators are best used as complementary tools, not the sole basis for trading decisions.

Hedging Strategies with ZAR Options and Futures

South African forex traders can utilize ZAR options and futures contracts to protect their positions and limit risk. Options offer fixed-cost downside protection while allowing potential upside gains. Buying a call option on Rand contracts during a potential uptrend can limit your loss if the Rand weakens unexpectedly.

Futures contracts, on the other hand, lock in specific exchange rates for future delivery, mitigating currency fluctuations. A short Rand futures contract can hedge against potential Rand depreciation, protecting your existing long positions. Choosing the appropriate hedging strategy depends on your risk tolerance and market expectations.

Technical Analysis of Local CFDs

CFD (Contract for Difference) trading allows South African traders to speculate on various underlying assets without directly owning them. Technical analysis of local CFDs, like those on JSE Top 40 stocks or the FTSE/JHB All Share Index, follows similar principles as traditional forex analysis.

However, understanding local economic and sector-specific factors becomes crucial. Analyzing news events, company announcements, and economic data alongside technical indicators can provide valuable insights into potential price movements of South African CFDs.

Sentiment Analysis

Social media sentiment analysis involves measuring the overall positive or negative sentiment towards a specific currency or market event. Tools analyse news articles, tweets, and other online mentions to gauge investor sentiment and identify potential market drivers. While not a direct predictor of price movements, sentiment analysis can act as a complementary indicator, highlighting underlying concerns or optimism impacting the market.

Remember, caution is key when interpreting sentiment data. Focus on reputable sources and combine it with traditional technical and fundamental analysis for a more holistic understanding of the market.

Fundamental Analysis

Fundamental analysis evaluates the inherent worth of a currency by assessing economic, financial, and other qualitative and quantitative aspects. This can include a nation’s interest rates, economic growth, political stability, and trade balance. 

 

The objective of fundamental analysis is to discover the underlying value of a currency and utilize this knowledge to make purchasing and selling choices.

Spot Forex

Buying and selling foreign currencies on the “spot” market, as opposed to the “forward” or “futures” markets, is referred to as “spot forex.” Spot forex trading aims to benefit from fluctuations in the exchange rate between two currencies.

Margin Trading

In margin trading, an investor borrows money from a broker to acquire an asset. The investor is then expected to give the broker cash or assets as collateral to cover the borrowed amount and any trading losses.

 

Leverage

Leverage, also known as margin, is the percentage or fractional increase an investor can trade from the amount of capital they have available. Leverage will allow investors to trade speculative values far higher than the capital they have available. Simply put – Leverage is borrowed capital within a live trading account.

 

Forex Spread

The spread in the foreign exchange market is the difference between a currency pair’s bid price and ask price. A market maker’s willingness to sell the quotation currency (ZAR) in return for the base currency (USD) is represented by the bid price in the USD/ZAR currency pair.

 

The ask price is the exchange rate at which the market maker is ready to sell the base currency and buy the quotation currency. The disparity between the two is referred to as the spread.

 

Pips

Pips are the smallest unit of price fluctuation for a currency pair on the foreign exchange market. Pips are often used to describe the difference in value between two currencies and are comparable to a “point” for other financial instruments such as stock indices and commodities.

 

Trade Execution

Trade execution refers to purchasing or selling a currency pair at a predetermined price. It is the last phase in the trading process, occurring after a trader has conducted research, conducted analysis, and decided when and at what price to join or quit a deal.

 

Order Types

Several order types are available to forex traders for entering and exiting transactions. Common order types include market orders, stop-loss orders, limit orders, and immediate orders.

 

Long/Short

A “long position” in forex trading refers to a deal in which a trader buys a currency at one price to sell later at a higher price. Additionally known as “going long” or just “long.”

 

A “short position” is when a trader sells a currency at one price to purchase it later at a lower price. This practice is also known as “going short” or “short.”

 

Forex Lots

Forex lots are measuring units. They determine the number of units of a currency being purchased. There are four varieties of forex lots available for purchase: 

• Standard Lot (100,000 units of the base currency)
• Mini Lot (10,000 units of the base currency)
• Micro Lot (1,000 units of the base currency)
• Nano Lot (100 units of the base currency)

 

Furthermore, the size of your position is defined by the lot size and the number of lots you purchase or sell.

 

Profit/Loss

 

The profit or loss in Forex is realized when an investor closes out a trade position. With a Profit the margin balance is increased, with a loss, it is decreased.

 

 

How to Choose a Forex Broker – a Must Read.

 

Finding the right Forex broker can be a complicated task. While most brokers may offer the same level of access and qualities in the foreign exchange market, the procedures and policies may differ dramatically.

 

Each Forex broker will represent a different level in the industry. Some will represent a high level of expertise with direct access to the market while other brokers are seen as distant with very little connection on offer.

 

Therefore, South Africans must understand the type of brokers that serve the industry before they trade.

 

The types of forex are crucial to an understanding before trading.

 

Here is an overview of the Main Broker Types available:

 

Dealing Desk (DD)

 

Dealing Desk or DD brokers refer to market makers. Dealing desk brokers or market makers will typically provide investors with fixed spreads and elect to quote above or below real-time market prices at any given time. Choosing to trade with a dealing desk is a wise choice for both beginner and expert traders who wish to avoid direct trading with liquidity providers. Dealing desk brokers customarily receive payment through spreads.

 

No Dealing Desk (NDD)

 

No Dealing Desk forex brokers are firms that allow forex traders to have direct access to the interbank market. A reputable NDD broker will not require the re-quoting of prices and traders will have the chance to trade following any economic announcements without facing restrictions.

 

Electric Communication Network (ECN)

 

ECN brokers are firms that offer and display actual order book details typically feature processed orders plus the offered prices by different banks within the interbank market. Most ECN brokers will offer important information to all Forex Market participants in order to improve market transparency. ECN brokers will allow investors to process all their transactions in the interbank market and charge a commission on each traded volume in order to earn an income.

 

Straight Through Processing (STP)

 

STP or Straight Through Processing brokers directly pass trading orders into their liquidity providers and do not interfere in order execution transactions. Most STP forex brokers will work with a selection of liquidity providers, providing their clients with a better chance of success in the forex market.

 

MTF (Multilateral Trading Facilities)

 

An MTF exchange guarantees that both buyers and sellers of financial instruments can collaborate according to non-discretionary rules. Even though an MTF is not a regulated exchange it operates under the same rules ensuring a fair trading system. An MTF exchange guarantees price efficiency and the efficient clearing of transactions. Compared to a traditional exchange, a multilateral trading facility provides traders with greater discretion, faster order execution speed, and reduced brokerage fees.

 

 

Forex Trading Account Types

 

The most common live trading account types will be based on the size of the lots an investor wishes to trade. With this taken into consideration, each different Live trading account will have a different minimum deposit level associated.

 

Here is an overview of the Most Common Forex Trading Account Types:

 

Mini/Micro Accounts

 

Micro Accounts are accounts best suited to traders with a small amount of capital. Micro Accounts will allow investors to enter the financial market with a small minimum deposit limit. However, due to Micro Accounts having a low entry barrier, there will be restrictions on an investor’s trading activity.

 

On the plus side, Micro Accounts will help traders to control their risk levels, making these types of accounts a perfect choice for beginner traders.

 

When it comes to a Mini Account, investors will be allowed to enter into contract sizes of 10,000 base currency units. Similar to Micro accounts, Mini Accounts require a relatively small amount of capital in order to get started.

 

Standard Accounts

 

Different brokers will use different names to refer to their standard accounts. Popular terms include Classic, Silver, or Intermediate.

 

Standard accounts most commonly have a minimum deposit limit of between $100 – $500 and will give users access to standard lots of currency. As a standard account will require a larger minimum deposit in order to trade full lots, most brokers will provide investors with more services and better offerings than those associated with smaller account types.

 

VIP/Professional Accounts

 

VIP or Pro accounts are generally reserved for investors who have a large amount of capital available. VIP or Pro accounts characteristically have a high minimum deposit limit of around $10,000 and will allow investors to trade standard lots.

 

VIP or Pro accounts are generally also ECN accounts, which means they will allow investors to trade in the market directly. Investors need to note that professional accounts for EU clients are slightly different.

 

Islamic, Swap-free Accounts

 

A swap-free or Islamic account refers to an account option available to clients who cannot earn or pay the interest due to their religious beliefs.

 

Under Sharia laws, Muslim investors are prohibited from taking or giving interest in any kind of activity.  Islamic investors should take note that Swap-free accounts may come with higher trading costs and various restrictions. No fees in the form of interests will apply to Islamic accounts.

 

Aside from Live Trading accounts, most reputable, regulated Forex Brokers will have a Demo account on offer.

 

Demo Accounts

 

Demo accounts will allow investors to practice their trading without risking real capital. Demo Accounts are virtual accounts that are loaded with virtual currency, most of which are free to use, but may carry a limited usage period.

 

MAM/PAMM Accounts

 

A MAM account is a master trading account that allows for sub-allocation customization.

 

It stands for Multi-Account Manager and enables additional flexibility when sub-allocating trades to customize the service to each individual client’s account size and risk profile. Furthermore, with MAM, investment managers can participate in fixed lot allocations.

 

Percentage Allocation Money Management is abbreviated PAMM. This one-of-a-kind trading arrangement allows investors to assign funds to a skilled trader or money manager, who then manages these assets across several trading accounts.

 

For this service, the money manager will earn a performance fee based on a certain percentage of the trading profits. The leftover profit/loss is returned to the investors in proportion to their respective allocations to the entire pool of money.

 

 

How to Open a Live Trading Account – Step by Step Example

 

Opening a live trading account is generally a straightforward process and most Forex Brokers will follow a basic sign-up structure.  Applicants will need to complete a registration which may include the completion of personal information and financial details.

 

Here is a look at the IG Group Sign-Up Process as an example:

 

1. Step 1:  Create Live Account

Start the application by clicking on the green “Create Live Account” button located on the landing page or throughout the website in the header of the page.

 

 

2. Step 2:  Registration Form

The applicant must start setup by supplying general information including a valid email address and country of residence.

 

 

3. Step 3:  Complete Personal Information

The next step will nee more personal information to be added, including the applicant’s direct contact details and identification number.

 

 

4. Step 4:  Adress Details

The applicant must complete their address details to move on to the final steps of the registration process.

 

 

5. Step 5: Financial Information

The second last step is to complete Financial details, including the applicant’s annual income and employment history.

 

 

6. Step 6: Trading History

In the final step, Applicants must provide their trading history.  Once this step has been completed, the application can be saved and closed.

 

 

Forex Broker Selection – 8 Key Factors to Consider

 

Regulatory Compliance

The Forex market does not have a central regulator, and beginner traders should look for regulatory authorities found in their country of residence. For example, South African Forex Brokers will be regulated by The Financial Sector Conduct Authority or FSCA.

 

Regulatory compliance is imperative as it ensures that South African traders receive fair, transparent trading conditions, fair treatment, proper resolution of disputes, and overall client fund security.

 

Furthermore, a good FX trading broker should ensure the following:

• Protection against negative account balances.
• Segregation of client funds.
• Investor protection and insurance if the broker cannot fulfil its financial obligations.
• Data and privacy protection.

Customer Service

A reputable broker must provide prompt and effective customer support so that you never have to worry about technical difficulties, deposit/withdrawal issues, or anything else that might impede the smooth operation of your trading activity. 

 

Customer service should ideally be bilingual, accessible 24 hours a day, seven days a week, kind, competent, and extremely responsive. A broker with superior customer care would certainly enhance your trading experience.

Trading Platform

The top forex broker will provide the most effective trading platforms. A trustworthy platform will provide rapid access to technical and fundamental analysis, a good security system, automated trading, visual elements such as graphs and charts, and user-friendliness at all times. 

Deposit and Withdrawal Options

For your profit and convenience, finding a forex broker that enables fast deposit and withdrawal options is crucial. Fast deposits allow you to bolster your trading position and take advantage of unexpected market opportunities. 

 

Furthermore, if you need to withdraw your cash for whatever reason, the withdrawal procedure should be quick and straightforward so that your monies can be returned within a few business days.

Range of Markets

The response of traders to limits is negative. The greater the number of trading instruments a forex broker provides, the more chances become available. 

 

Choose a broker that provides not only major currencies such as EUR/USD but also minor currencies, exotic currencies, metals, commodities, share CFDs, and more. 

 

During times of economic unrest where there is a significant amount of political risk, gold, for example, is a popular trade tool.

Trading Tools

As your partner, your broker should give you the materials necessary to trade with the utmost confidence in the inherently dangerous financial markets. The following are some of the most significant resources to look for in a broker:

• An economic calendar is an essential instrument for forex traders. It gives a timetable of news releases and an estimate of their influence on the underlying financial markets.
• Trading calculators
• Market analysis
• Technical and Fundamental tools such as economic indicators, drawing tools, newsfeeds, etc.
• TradingView
• AutoChartist, etc.

Educational Resources

If you are a novice investor, you may wish to deal with a broker that provides instructional material, third-party research, analysis, tools and charts, calculators, and other resources.

 

Broker Cost

Online Forex trading can and has been a great income-generating activity but making use of the Brokers services will come at a cost.  Cost may include a minimum deposit in order to open an account, commission per trade, rollover fees, or deposit and withdrawal charges.

 

 

First Forex Trade – Step-by-Step Guide

 

Step 1:  Open the Trading Platform on offer.

 

A trading platform refers to the software interface provided by an investor’s chosen Forex broker.  A trading platform gives customers to access as traders to the Forex markets. Trading Platforms may be available as an online web-based portal, a mobile app, a downloadable program, or a combination of the three.  This will be depended on the Broker chosen.

 

Step 2:  Open the Chart.

 

The next step is choosing a currency pair and opening a chart. This is done by selecting a timeframe. A forex chart will graphically illustrate the historical behavior, across a variety of time frames, of the relative price movement between two currency pairs.

 

Step 3:  Add Indicators

 

Next, the trader will add technical indicators to the chart opened in Step 2. The customizable settings for technical indicators will include price, volume, and open interest.

 

The two basic types of technical indicators are:

 

• Overlays:  Overlay indicators may use the same scale as prices and plot over (overlay) the top of the prices on a stock chart.

• Oscillators:  Oscillators are technical indicators that oscillate or change between a local minimum and maximum. These indicators will plot, or display, above or below a price chart.

 

Step 4:  Place an order.

 

After technical indicators have been set, a trader can prepare to place the order.   Orders should be placed according to how a trader aims to trade and how they intend to enter and exit the forex market.

 

Step 5: Set a Stop Loss and Take Profit Levels.

 

After an order is opened, a trader will set its stop loss and take profit levels. This is an optional but highly recommended step to take.  Setting the stop loss will limit a trader’s losses in case the market moves in an unexpected direction.  In turn, setting a take profit level will ensure that the trade exits profitably once the market makes an expected downward move.

 

Step 6: Order Confirmation.

 

The next step is to submit the order and wait for the confirmation screen. The order confirmation screen is extremely important as it serves as a ticket number – which can be used as a reference.

 

Step 7: The Waiting Period.

 

The second last step may seem like the easiest step, but it may be the most tedious of all.  Step 7 – the waiting period begins. Some expert traders recommend turning off the screen and walking away from the market once the order is entered.

 

Step 8: Complete the Trade.

 

And finally, the trade is complete! A trader’s first trade may result in either a profit or loss.  Either way, it should be seen as a learning experience.

 

 

The Best Forex Brokers in South Africa

This article lists the best brokers that offer forex and CFD trading to South African traders. In addition, we have further identified the brokers that offer additional services and solutions to South African traders.

 

Best MetaTrader 4 / MT4 Forex Broker in South Africa

 

 

Overall, IG is the best MT4 Forex Broker in South Africa. IG has been operating since 1974 and is a popular MT4 broker in South Africa. 

 

IG offers South African beginners the best selection of education, analysis, and over 19,000 financial markets that they can trade through demo and live accounts.

 

Best MetaTrader 5 / MT5 Forex Broker in South Africa

 

 

Overall, Markets.com is the best MetaTrader 5 Forex Broker in South Africa. Markets.com is a unique forex broker that focuses on technology to make forex trading easy for all types of traders. 

 

South Africans can easily trade more than 2,200 markets via Markets.com’s MT5 and expect competitive spreads and commission-free trading.

 

Best Forex Broker for beginners in South Africa

 

 

Overall, IC Markets is the best Forex Broker for beginners in South Africa. IC Markets is a minimal-risk and high-trust broker for South African beginners. In addition, IC Markets offers comprehensive educational materials, a demo account, and dedicated customer support around the clock.

 

Best Low Minimum Deposit Forex Broker in South Africa

 

 

Overall, XM is the best Low Minimum Deposit Forex Broker in South Africa. South Africans can register a ZAR account with XM within minutes. Once they deposit the minimum of 85 ZAR / 5 USD, they can start trading across 1,000 CFD instruments.

 

Best ECN Forex Broker in South Africa

 

 

Overall, OctaFX is the best ECN Forex Broker in South Africa. OctaFX charges spread from 0.0 pips on major markets and offer comprehensive copy trading solutions to social traders. In addition, as an NDD broker, OctaFX sends orders to top liquidity providers and fills orders within milliseconds.

 

Best Islamic / Swap-Free Forex Broker in South Africa

 

 

Overall, AvaTrade is the best Islamic / Swap-Free Forex Broker in South Africa. Muslim traders can register an account with AvaTrade with a minimum deposit of 1,700 ZAR ($100). Converting their account comes at no extra charge, and zero admin or holding fees are charged.

 

Furthermore, Muslim traders in South Africa can expect access to halal trading instruments, a powerful trading platform, a range of economic indicators, graphical tools, and customizable charts.

 

Best Forex Trading App in South Africa

 

 

Plus500 is a trusted, stock exchange-listed CFD provider.

 

Traders can register a trading account within minutes and start trading on mobile once they make the 1,700 ZAR / 100 USD minimum deposit using flexible payment options.

 

Best Forex Rebates Broker in South Africa

 

 

Overall, FxPro is the Best Forex Rebates Broker in South Africa. FxPro is a trusted South African broker that offers traders up to $20 back on equities. FxPro also offers a ZAR-denominated account to South Africans, exempting them from currency conversion fees.

 

Best South African Rand Trading Account Forex Broker in South Africa

 

 

Overall, Global GT offers the best South African Rand trading account in South Africa. Global GT is a South African broker well-regulated by the FSCA. In addition, global GT offers a ZAR-denominated account that can be used to trade a massive range of markets via MetaTrader 5.

 

Best Lowest Spread Forex Broker in South Africa

 

 

Overall, HFM is the best lowest spread Forex Broker in South Africa. HFM is one of the best STP and ECN brokers for South Africans based on the Micro Account and range of educational resources. Furthermore, traders can expect zero-pip spreads on EUR/USD on MT4 and MT5.

 

Best NDD Forex Broker in South Africa

 

 

Overall, Tickmill is the best NDD Forex Broker in South Africa. Tickmill is well-regulated and offers South Africans competitive STP pricing from 1.6 pips on the Classic Account, with the benefit that commissions are not charged.

 

Best STP Forex Broker in South Africa

 

 

Overall, Exness is the best STP Forex Broker in South Africa. Exness offers a range of account types from which traders can choose. Furthermore, South Africans can register a ZAR account and expect spreads from 0.0 pips on EUR/USD.

Exness does not take the opposite side of trades and sends orders to top liquidity providers who aggregate the best pricing in the market. South Africans also have access to a transparent fee schedule, instant deposits and withdrawals, and an education academy.

 

Best Sign-up Bonus Broker in South Africa

 

 

Overall, JustMarkets is the best sign-up Forex Broker in South Africa. South Africans can choose from several trading accounts when they sign up with JustMarkets. Furthermore, when traders register for the first time, they can earn a 30 USD no-deposit bonus to kickstart their trading journey.

 

Deepen the Technical Aspects to understand before trading in the South African CFD market.

Chart Examples:

• USD/ZAR Head and Shoulders Pattern: Analyze a historical chart of USD/ZAR showcasing a classic head and shoulders pattern. Explain how the neckline breakout, supported by Sarii indicating a potential rate hike, could signal a sell opportunity for the Rand.
• Gold CFD Fibonacci Retracement: Demonstrate how using Fibonacci retracement levels on a South African Gold CFD chart can identify potential areas of support and resistance after a significant price swing, offering entry points for long or short positions.
• JSE Top 40 MACD Divergence: Explore a JSE Top 40 constituent chart where the MACD indicator diverges from the price action, suggesting a potential trend reversal. Analyze how JTS sentiment might further confirm this reversal for targeted CFD trading.

Timeframe Analysis:

• Short-Term ZAR/JPY Scalping: Discuss how moving average crossovers on a ZAR/JPY 1-minute chart can provide scalping opportunities based on quick price movements, highlighting the importance of tight risk management with volatile pairs.
• Medium-Term USD/ZAR Swing Trading: Analyze a USD/ZAR daily chart using Bollinger Bands and RSI to identify potential swing trading setups. Explain how RVI trends can contribute to identifying profitable swing entry and exit points within the broader South African market context.
• Long-Term JSE Top 40 Positional Trading: Explore using Elliott Wave Theory on the JSE Top 40 index for longer-term trading. Discuss how identifying wave patterns can inform investment decisions in specific South African company CFDs aligned with the overall market trend.

Risk Management

Using Stop-Loss Orders

Stop-loss orders are your financial allies, automatically exiting trades when losses reach a predetermined level. In fast-paced forex markets, emotions can cloud judgment, leading to holding onto losing positions hoping for a miracle comeback. Stop-loss orders put a buffer between hope and reality, protecting your capital from impulsive decisions.

Think of them as insurance – a small sacrifice to prevent potentially larger losses. By setting appropriate stop-loss levels, you define your acceptable risk for each trade and let the market do the rest. This frees you to analyze future opportunities with a clear head, knowing your downside is already contained.

Taking Profits Early

The allure of maximizing profits can tempt traders to hold onto winning positions, hoping for bigger gains. However, forex markets are notoriously volatile, and greed can quickly turn a win into a loss. Taking profits early, while less thrilling, safeguards your capital and ensures consistent long-term success.

Set realistic profit targets based on your analysis and risk tolerance. Locking in profits at predetermined levels protects you from unexpected reversals and prevents the emotional rollercoaster of hoping for further gains. Remember, small, consistent wins add up over time, building a robust trading portfolio.

Avoiding Overtrading

Overtrading, the temptation to make frequent trades regardless of opportunity, is a recipe for disaster. Constant churning incurs commission costs, erodes discipline, and increases the risk of impulsive decisions. Focus on quality trades based on your strategy and analysis, not the urge to fill the day with activity.

Patience is key. Wait for high-probability setups and stick to your trading plan. Less is often more in forex trading. A few well-executed trades with proper risk management can outweigh the losses incurred by impulsive overtrading.

Using Appropriate Leverage

Leverage, a double-edged sword, can magnify both profits and losses. While tempting for its potential to quickly boost returns, wielding it recklessly can lead to devastating consequences. Understand your risk tolerance and use leverage responsibly. Start with low leverage ratios, increasing them only with experience and a proven track record.

Remember, leverage amplifies losses just as it amplifies gains. Always pair appropriate leverage with risk management tools like stop-loss orders and position sizing strategies. Never gamble with your entire capital, and maintain sufficient margin to weather market fluctuations.

Trading with a Regulated Broker

Choosing a regulated broker is more than just a formality; it’s the foundation of secure and ethical trading. Regulated brokers operate under strict guidelines, ensuring transparency, fair execution, and client protection. They offer segregated accounts, protecting your funds from the broker’s own activities.

Don’t be lured by unregulated brokers offering unrealistic promises and high leverage. Stick to reputable, licensed brokers with a proven track record. Research their regulatory status, fees, and trading conditions before entrusting them with your capital.

By internalizing these key principles, South African forex traders can navigate the market with greater confidence, protecting their capital while maximizing their earning potential. Remember, discipline, strategy, and responsible risk management are the cornerstones of long-term success in the dynamic world of forex trading.

• Dynamic Stop-Loss Adjustments: Explain how utilizing trailing stop-loss orders based on ATR or percentage volatility can protect profits in dynamic Rand pairs like ZAR/EUR, adapting to the unique market behavior.
• Position Sizing Based on FSCA Leverage: Analyze how the FSCA leverage regulations impact your position sizing strategy for different South African instruments. Provide examples of calculating appropriate position sizes in relation to your account capital and risk tolerance.
• Advanced Risk Management Techniques: Discuss more advanced risk management techniques like hedging positions using Rand-denominated futures contracts or options to mitigate exposure to adverse market movements in South Africa.

Tailored Insights for Forex Traders

Beginners:

• Moving Average Crossover Strategy: Teach beginners how to identify buy and sell signals on South African CFDs using simple moving average crossovers, recommending user-friendly platforms with beginner-oriented analysis tools.
• Relative Strength Index (RSI): Explain how interpreting RSI values above 70 or below 30 on ZAR/GBP can indicate potential overbought/oversold conditions, offering entry points for mean reversion trades.
• South African Economic Calendar: Recommend resources like the SARB calendar and South African economic data releases to help beginners understand how upcoming events might influence technical signals for local instruments.

Intermediate Traders:

• Bollinger Band Breakouts: Discuss identifying momentum trading opportunities in USD/ZAR using Bollinger Band breakouts, suggesting confirmation through volume analysis or JSE Top 40 performance to enhance signal reliability.
• Fibonacci Retracement Levels: Explain how applying Fibonacci retracement levels on Gold CFDs after a significant price movement can offer precise entry and exit points for trend continuation or reversal trades.
• JSE Top 40 Sector Rotation: Analyze how using technical indicators on individual JSE Top 40 sector indices can identify outperforming or underperforming sectors, enabling targeted CFD trading based on sector rotation strategies.

Experienced Traders:

• Elliott Wave Theory in Action: Explore advanced technical analysis using Elliott Wave Theory on USD/ZAR to predict potential wave patterns and identify trade setups aligned with the market cycle.
• Volume Analysis for Sentiment Gauging: Discuss how analyzing volume patterns on EUR/ZAR can help gauge trader sentiment and confirm technical signals, potentially revealing hidden bullish or bearish momentum.
• Spread Analysis and Cost Considerations: Recommend analyzing bid-ask spreads and commission fees for South African CFDs offered by different brokers, emphasizing its importance for experienced traders with high trading frequency.

The Psychology of Forex Trading

Forex trading isn’t just about numbers and charts; it’s a mental dance where emotions can lead to costly mistakes. Fear can tempt you to close winning trades too early, while greed might nudge you to hold losing ones hoping for a comeback. Overconfidence can cloud your judgment, leading to risky bets, while revenge trading fueled by anger can turn your losses into a snowball.

Understanding your own psychological biases is crucial. Are you prone to anchoring to initial information, ignoring new evidence? Do you fall prey to the sunk cost fallacy, pouring more money into failing trades to justify past decisions? Cultivate self-awareness, journal your trades, and identify your triggers. Replace impulsive reactions with discipline and a pre-defined forex trading plan. Remember, emotions should inform your approach, not dictate your actions.

Developing a Forex Trading Strategy

Having a forex trading strategy is like having a roadmap in the volatile currency market. It provides a framework for making informed decisions and helps you avoid impulsive trades. Your strategy should be tailored to your goals, risk tolerance, and preferred analysis methods.

Technical analysis, studying charts and indicators, can identify trends and predict price movements. Fundamental analysis, focusing on economic data and central bank policies, can reveal the long-term drivers of currency values. Choose your analysis tools wisely, backtest your strategy on historical data, and constantly refine it based on market realities.

Remember, the best strategy is the one you understand and follow consistently. Don’t chase the latest hot trend or blindly copy others. Build a forex trading strategy that reflects your trading personality and stick to it with discipline. The market will test your resolve, but a well-defined strategy will be your compass in the storm.

 

Conclusion

 

Overall,  Forex Trading has the potential to be profitable. Novis traders need to understand that Forex is not a get-rich-quick scheme, nor will it be fast money, and success and Profitability in Forex can and will only be achieved when an investor understands the Forex Market, Trades with the Right strategy, Selects the right Broker, and makes use of safeguards such as stop-loss orders.

 

Forex trading is not fast money. Furthermore, success and profitability in Forex will only be achieved when an investor understands the Forex Market, chooses a suitable broker, trades using the right strategy, and uses risk management to safeguard their capital (i.e., stop-loss orders and take-profit).

 

 

Frequently Asked Questions

 

How much do I need to start forex trading in South Africa?

Many forex and CFD brokers have extremely low minimum deposit requirements, and you may start trading with as little as R70 ($5), with some much lower. 

However, starting with at least R1,700 (100 USD) cash and no more than 1:20 leverage is recommended.

 

Can I start trading with R200 in South Africa?

You can register an account with a forex broker with a $10 minimum deposit, but you might not be able to cover margin requirements and other trading fees with a deposit of R200. Best amount to start forex trading in South Africa is actaully $100. 

 

What is the best bank for forex trading in South Africa?

For the last six years, Global Finance Magazine’s annual World’s Best Foreign Exchange Provider awards have recognized FNB as South Africa’s best FX trading provider.

 

How much do Forex Traders make a month in South Africa?

In South Africa, a Forex Trader can expect a monthly salary of about R35 576, or 41% more than the average salary in the country.

 

Who are the Top 10 Richest Forex Traders in South Africa?

The top 10 richest forex traders in South Africa are Nelisiwe Masango, Louis Tshakoane Junior, Paballo Nkwe, Simz D’ Mandla, Shaun Benjamin, Jabulani Ngcobo, George van der Riet, Sandile Shezi, Ref Wayne, and Danielle Lester.

 

Who is the best forex broker for beginners?

IC Markets is the best forex broker for beginners in South Africa. IC Markets offers an enormous range of educational tools and resources, including podcasts, webinars, Web TV, Video Tutorials, Trading Knowledge, a demo account, trading lessons, and more.

 

Addendum/Disclosure:

No matter how diligently we strive to maintain accuracy, the financial markets are volatile that could shift and change at any given time, even if the information supplied is correct at the time of going live.

 

Disclaimer

 

75% of retail investors lose money when trading CFD and fx trading. * High risk of losing in the forex market when trading or speculating in forex or commodities. * CFDs are complex instruments and are open (5) five days a week. CFD’s are offered on a range of markets.

 

Trading in the foreign exchange (forex) and contracts for difference (CFD) markets carries a high level of risk and may not be suitable for all investors. The high degree of leverage that is often obtainable in forex and CFD trading can work against you as well as for you. As a result, forex and CFD trading may not be appropriate for all investors, so please ensure that you fully understand the risks involved and seek independent advice if necessary.

 

It is important to be aware that past performance is not indicative of future results and that the value of your investments may fluctuate. You may sustain a total loss of your initial investment or even more than your initial investment, and therefore you should not invest money that you cannot afford to lose.

 

You should be aware of all the risks associated with forex and CFD trading and seek advice from an independent financial advisor if you have any doubts.

 

Please note that forex and CFD trading involves significant risk and is not suitable for everyone. You should carefully consider whether trading is appropriate for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Past performance is not indicative of future results. Opinions, market data, and recommendations are subject to change at any time.