FX trading :You can invest in the Forex market in South Africa; it is a legal and well-regulated investment. Forex recorded a daily turnover of about $19.1 billion per day in 2017 in South Africa. The rand also remains one of the top 20 most traded of all currencies in the world today and the annual trading volume in 2016 was about $70 billion.
Best Forex Brokers in South Africa for 2020
Forex trading South Africa has very high liquidity and the pace is very quick. Be that as it may, Forex trading is known to be risky. The information provided in this review will enlighten you about the important things you need to know before you venture into Forex trading. We will also enlighten you about the minimum amount required to begin trading Forex.
If you have searched for helpful information to no avail, then you have come to the right source of information.
What is Forex trading?
FX trading has to do with the buying and selling off currencies globally for the purpose of making profit. FX traders take advantage of the fluctuations in the concerned currencies to make profit.
The trader looks to buy a currency pair if his analysis indicates that the value of that currency will appreciate and seeks to sell the currency if he believes that the value will fall against other currencies. The profit or loss is determined by the difference between the entry price and exit price when you close the trade. This is about how Forex trading SA works.
We will enlighten you further about how it all works in the remaining part of this write-up.
What is Forex market?
Forex is an abbreviated form of Foreign Exchange. You can also simply refer to it as FX. Some do call it Spot FX. It involves trading global currencies against each other. Some of the common symbols in Forex trading are EUR/ZAR and USD/ZAR.
FX Market remains the most liquid of all markets in the world today. It is also open 24 hours of the day and about 5 days of the week. The average turnover globally is $5 trillion per day and this makes it the largest of all the financial markets in the world. Even the New York Stock Exchange will have to operate up to one month before it can attain such a huge turnover.
Some of the participants in Forex trading South Africa are commercial corporations, currency speculators, institutional investors, central banks, governments and even commercial banks.
Understanding currency pairs
FX trading involves buying and selling of one currency against another simultaneously and the currencies involved are called currency pairs.
When you buy USD/ZAR, for example, it means you are simultaneously buying the USD while also selling the South African Rand.
There are more than 100 currency pairs in the world today, which include 7 Majors and over 50 minors. There are equally many exotic pairs available. You need adequate study to know the right pair to trade and which is not. We will give you all the helpful details you need here.
What do currency pairs mean?
Currency pair is the quote of a particular currency against another. This means that you will be trading two currency pairs against each other each time you trade FX.
Common terms related to currency pairs
- Base & quote currency: In EUR/USD, the first one is the Base currency and the second one is the quote currency.
- Bid& Ask prices: Bid price is the market price at which the base currency can be sold, while the ask price is the price at which the base currency can be bought. The bid price is always lower.
- Spread: This is the difference between the bid price and ask price
- Pips: It stands for Percentage in Point. 1 pip is the smallest measure at which the price moves.
Types of currency pairs
- Major currency pairs: They are the most highly traded currency pairs. The volume makes up about 70% if all currency pairs traded.
- Minor currency pairs: They are also called cross pairs. They have less liquidity than the majors ones and are also more volatile. They represent about 15% of all the currency pairs traded.
- Exotic pairs: Exotics are major currencies paired against the currency of emerging economy. A good example is the USD/ZAR or GBP/NOK.
How to start FX trading
- Open a trading account with a broker and make sure that the broker is regulated. You can check above for a list of regulated brokers.
- Learn about Forex trading south Africa terms, like lot size, leverage, margin, stop loss and so on.
- Placing your trades on FX trading platforms by picking a currency pair, selecting the right lot size and leverage. Do not also forget to use stop loss and take profit.
Forex trading strategies
Those involved in Forex trading SA make use of either of two types of strategies:
- Fundamental analysis, which is a strategy based on news release and the tools used are called economic indicators. You will need an economic calendar to use this.
- Technical analysis, which involves trading off the FX chart. It is about the best strategy for short term day traders. Those who use technical analysis make use of what is called technical indicators.
Experts think it is better to combine both technical and fundamental strategies to make a reliable Forex trading strategy.
Forex trading platforms
Most of the Forex trading FX brokers offer different categories of trading platforms:
The two main types are the MT4 and MT5 platforms. They can be accessed on the Web, mobile devices and PC. You need to download the platform before you can access the charts.
It allows you to open the chart on your browser and removes the need to download anything.
Below is a list of regulated FX brokers for South African traders.
- It is regulated by the CySEC, FCA and FSCA
- The maximum leverage is 1:1000
- The minimum deposit is $5
- Traders can access MT4 and MT5 platforms for mobile, web and desktop
- It is regulated by CYSEC and ASIC
- The maximum leverage is 1:888
- The minimum deposit is $5
- Traders can also access both MT4 and MT5 trading platforms
- It is regulated by the CySEC and FCA
- The maximum leverage is 1:2000
- The minimum deposit is $1
- Also, traders can access booth the MT4 and MT5 trading platforms
Risks and opportunities involved in FX trading
Some of the opportunities or benefits are:
- Very low startup capital
- The liquidity is very high
- You can access both the buy and sell orders
- The market is also open for 24 hours per day
- Leverage can help you to open a large position with small capital
Some of the risks or disadvantages are:
- It can cause you mental and emotional stress
- The high volatility can cause you to lose your capital
- You will end up with very bad experience if you trade with an unregulated broker
- Access to leverage can put you at the risk of losing your investment
How to manage risks
- Make sure you have a working trading strategy
- Make sure you master the trading strategy before you go into live trading
- Do not use leverage higher than 1:50
- You should also not risk more than 2% of our capital
Find help with FXbroker.co.za
Fxbroker.co.za is the best platform to consider for everyone planning going into Forex trading SA. The platform can connect you with a series of regulated FX brokers and each of the brokers is verified to be reliable for South African traders.
You will also find help with the trading guide provided on this platform. The trading guide is also comprehensive and well-retained. Each of the contents is equally well-researched before being made public. So, you are always in safe hands when you partner with this outlet.