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A Brief History of Forex trading SA
Stock markets can trace its roots back to 100s of years ago. The Forex market is relatively new compared to the stock market. While Forex had been around since humans have been using currencies as a means of exchange. However, the modern idea of Forex trading SA did not come up until recently. The Breton Woods signed in 1971 allowed major currencies to float freely among one another and against one another. This then gave rise to foreign exchange trading and services.
Most of the organizations involved in the Forex markets today are an investment and commercial banks and they do this on behalf of their clients. Traders can also participate in speculative opportunities, in which one currency can be traded against another for individual and professional investors.
Forex Trading South Africa
Looking to trade at safe Forex brokers sites in South Africa? forexhour.co.za lists the top SA Forex trading South Africa Companies for 2020. All sites are fully regulated, vetted by our team, and can be trusted to offer trusted trades online. We collect big exclusive sign up offers, review the full Forex brokers and are here to help with any questions. Find Forex trading SA reviews.
We are always at your service at Deriv. We are here to guide you about Forex trading in South Africa so that you can profit consistently and be among the high flyers in Forex trading SA. Studies show that only about 5% of Forex traders in South Africa are making a consistent profit from trading Forex, which means the remaining 95% are making losses or inconsistent profit.
South Africa Forex trading SA techniques for Beginners
Day trading may be a popular trading approach where you purchase and sell a financial instrument over a time-frame of one day’s trading to take advantage of small price movements.
Day trading is another short-term trading style, you’re typically only taking one trade each day and shutting it out when the day is over. These traders like picking a side at the start of the day, working on their bias, then finishing the day with either a profit or a loss.
Range trading can usually be applied at any time, but it’s best when the forex market nonexistence direction with no discernible long-term trend in view. Range trading is at its weakest during a trending market, especially if market directional bias isn’t accounted for.
Price action trading
Price action trading may be a practice for financial market speculation which consists of the analysis of basic price programs across time. It’s employed by many retail traders and sometimes by institutional traders and hedge fund managers to form calculations on the longer-term direction of the worth of security or monetary market.
Trend trading is typically considered a mid to long-term trading strategy, but it can in theory cover any time frame, counting on how long the trend lasts. It’s usually accepted by traders preferring a swing trading.
If you are one of those that are making a consistent loss from Forex trading South Africa, you can partner with us at Forex Hour and we will help you to start making a consistent profit in Forex trading SA. We have been in the Forex market industry for years and have honed our expertise over these years. We have won accolades and have also warmed our ways into the hearts of our teeming clients thanks to our insistence on top quality services at all times as far as Forex trading South Africa is concerned in South Africa.
What exactly do we do at Forex Hour South Africa?
We provide helpful information that can help the trader to succeed in Forex trading. We can also guide the trader to make the right choice when trading Forex South Africa so that he can consistently be in the money at the expiration of every open trading position.
It is one thing to have a good Forex trading SA strategy that can make you money consistently and it is another thing to have a good Forex broker. In fact, your Forex trading South Africa may not yield any positive fruit if your broker is not reliable. Consequently, you need a reliable Forex broker to make headway in Forex. At ForexHour, we enlighten Forex traders about the best Forex brokers so that they will not end up with the wrong platform.
Forex trading cm trading platforms
Our online trading professionals have taken time to investigate different types of Forex SA brokers and pick out the good ones among them. We equally show our clients those Forex brokers that are regulated and domiciled in South Africa so that they can open a Forex trading account in line with the country’s financial regulations and also trade Forex in the local currency, Rand.
All the Forex brokers on our platform at Forex Hour have been properly investigated and we only add regulated and reliable brokers to our platform. We take time to read reviews about each of the brokers to find out if that broker delivers what it promises.
What is Forex Trading SA?
Forex, also referred to as FX trading, currency trading or foreign exchange is a global decentralized market for the trading of currencies. The Forex market is the world’s biggest and most liquid market. With an average volume of $5 trillion traded daily, this market determines foreign exchange rates for every currency.
Online Forex Trading
The main participants of the foreign exchange market include commercial banks, foreign exchange brokers, central banks, MNCs and individuals and small businesses. One of the reasons individuals speculate currencies in online forex trading is to make a profit or hedge unwanted currency risk. All these participants in the forex trading marketplace trade via a bank or a broker. A broker or a bank gives the retail client a trading account that will be funded in base currency. Once it is funded, the trader will be able to buy and sell currencies online to make a profit.
How Does Forex Trading Work in South Africa?
Foreign exchange trading online is all about buying and selling currencies. You trade one currency for another. To trade, you are required to open an account and deposit money. You can trade for the short-term or long-term. FX trading is traded in currency pairs, for example, EUR/USD, the most-traded currency pair in the world. The first currency is called the ‘base currency’, while the second currency is called the ‘quote currency’.
Example of trade; the quotation EUR/USD 1.1234 is the price of the euro expressed in U.S dollars. This means 1 Euro equals to 1.1234 American dollars.
The Forex market is open 24 hours a day in different parts of the world, from 5 p.m. EST on Sunday until 4 p.m. EST on Friday. Most of the currencies are traded in the major financial centers of Zürich, Frankfurt, Paris, Sydney, Singapore, London, New York, Tokyo and Hong Kong.
What Influences Prices in Forex Trading?
There are a lot of factors that cause exchange rates to change. It is very important to know why the exchange rate changes. The main causes of changes in supply and demand are due to changes in geopolitical events, economic trends and changes to market sentiment. But 6 main factors influence prices in currency trading:
- Differentials in interest rates
- Differentials in inflation
- Public debt
- Current account deficits
- Political and economic stability
- Terms of trade
Always remember that when you trade, you trade currency for another. When one currency falls, the other currency rises.
Basic Forex terms
Some of the most used terms in currency trading
- Pip – A Pip is a Percentage in Point (PIP), is a very small measure of the change in a currency pair in Forex
- Ask Price – Ask price is the price a trader will buy a currency pair at
- Bid Price – The Bid price is the price an online trader is willing to sell a currency pair for
- Spreads – Is the price difference between where a trader may buy or sell an underlying asset
- Currency rate – A currency rate is the relative value between two currencies. Or the rate at which one currency exchanges with another
How to choose a Forex broker in South Africa
Before you start trading Forex, you need to first register with a Forex broker. A Forex broker is the one that provides the platform on which you can trade Forex. The broker connects you to the Forex trading world and provides you with all the tools you need for making your analysis and deciding on which instrument to trade. As a South African Forex trader, you will come by so many Forex brokers with each of them, claiming to be reliable. However, you should think twice before taking their words for it. You should find out how reliable or otherwise the brokers are so that you will not end up making avoidable mistakes.
In this section, we will show you a couple of things that you must bear in mind when choosing a Forex broker in South Africa.
Regulation is very important
One of the most important things to consider when selecting a Forex broker is regulation. You should first find out if that broker is regulated first before you start considering any other factor. You are better off if the broker is regulated by tier-one jurisdictions since such a set of regulators are strict with the issue of security and can always keep the broker on a leach so that nothing will ever go wrong with your account or fund. As a South African Forex trader, you should be on the lookout for Forex brokers that are regulated by the Financial Services Conduct Authority (FSCA). As your good fortune will have it, the FSCA is a tier-1 regulator and can be trusted to adequately monitor the activities of the broker to ensure that your funds are not tampered with in any way. You should only feel comfortable with brokers that are regulated with tier-1 regulators like the FSCA. Bear in mind, however, that you can also consider other brokers that are not regulated by the FSCA but by other tier-1 regulators, such brokers can also be trusted to protect your interest at all times.
What is the cost of trading?
Before you register with that Forex broker, you need to take the issue of fees seriously. Trading with some brokers can be very expensive and you may end up parting with lots of Rands for every activity that you carry out on the broker’s platform. Many brokers charge commissions, while some other ones do not charge commissions. Among those that charge commissions, the amount they charge as commissions differs one from another. You should take some time to compare these brokers towards making the right choice among them.
One other important factor to consider is the pip spread. Some brokers offer high pip spread, while the spread is low on some other brokers. You should be wary of those brokers that charge imposes widespread on popular currency pairs like EUR/USD. Most brokers do not charge their clients anything on deposits, but many of them charge the client a processing fee on withdrawals. This is one other very important factor to bear in mind when choosing a Forex broker. You are better off with brokers that do not charge anything for withdrawals since this means that all the profit you make will be deposited to your bank account when you request for withdrawal. Also, brokers offering tight spreads are always better than those offering wide spreads.
Consider available trading platforms
Brokers offer different types of trading platforms. Virtually all of them offer MetaTrader 4 trading platform, while many of them support MetaTrader 5 trading platform. Some offer WebTrader, and some even support cTrader. Some of these trading platforms are basic, while some other ones are advanced. The most basic ones tend to be more popular than the advanced ones. As a result, the basic ones can support several custom indicators that can help you to make the right trading decisions each time you trade. The same can rarely be said about the most advanced ones. MetaTrader 4 (MT4) is about the most basic and most popular of all types of trading platforms. It is better to register with a broker that supports this trading platform. If you are an advanced trader, then you can consider a broker that offers more advanced trading platforms, like the cTrader.
As a beginner, you should stick to a trading platform that is very easy to understand and one on which you can place your trade without any hassle whatsoever. If you are a day trader, you can go for a platform that offers features like Level 2 quotes and provide in-depth market charts towards helping you to make a better trading analysis.
Quality of the customer service is very important
Before you register with a Forex broker, you need to closely assess the quality of the customer service as this can go a long way to determine how reliable or otherwise the broker is. First of all, check if the broker allows its clients to communicate via several methods, like email, live chat and phone call. Additionally, find out if this means of communication is accessible 24/7. You are better off with brokers that offer such a high standard of customer service than those that do not. Consistent availability of the customer service indicates that you can get quick responses to your messages so that any issue you have can be resolved without delay.
Some brokers even take customer care to a different level entirely by providing expert account advisors that can help the client to make trades so that the trader can maximize profit, as well as, reduce risk.
What are the special offers from the broker?
Before you make your final decision about which broker to choose among the many operating in South Africa, first find out about the various offers made available by the broker as this can determine how profitable you can be while trading with that broker.
What is the FSCA?
The FSCA is the acronym for Financial Sector Conduct Authority. It is the regulator of market conduct in South Africa and oversees the activities of Forex brokers in the country. It monitors the activities of financial institutions, financial services and various financial products so that the interest of South African participants of those services will be protected. The body ensures that all financial institutions operating in South Africa obeys the law and it is responsible for overseeing the activities some of the organizations under the purview of the FSCA are banks, market infrastructures, retirement funds and administrator and so on.
The FSCA helps to keep the integrity of the South African financial market intact. It also protects the interest of the financial customers of any of these organizations by ensuring that the organizations treat their customers fairly. The FSCA also encourages financial institutions to provide adequate financial investment education to their customers so that the customers can make informed decisions when considering any venture.
The FSCA was established in line with the Financial Sector Regulation Act 9 of 2017, which is simply called the FSB Act. The body was established in April 2018. Its establishment brought an end to the Financial Services Board (FSB), which was initially saddled with the responsibility of controlling the South African financial market.
The FSCA is also responsible for managing the activities of non-bank financial intermediaries, which are:
- Capital Markets
- Financial Services Providers
- Collective Investment Schemes
- Lloyd’s correspondents
- Re-insurers, long and short-term
- Friendly Societies
- Retirement funds
- Nominee companies
- Other credit agents
Risks involved in Forex trading
Forex trading is one of the best ways to make a lot of money online, but it is also one of the riskiest investments anyone can ever venture into. While thinking of the money-making opportunities, you should also consider the associated risks so that you can have a balanced idea of what to expect from Forex trading. It can help you to forget about the pipe dream of becoming an overnight millionaire by trading Forex. Trading the Forex market with leverage is one of the best ways to make a lot of money from Forex trading, but that same leverage can make you lose a lot of money. In this section, we will open your eyes to some of the risks you should be wary of as a Forex trader so that you can get adequately prepared for eventualities.
Another name for margin risk is leverage risk and it can pay a very important role in your Forex trading adventure. Margin risk enables the Forex trader to use leverage for trading. Leverage is a two-edged sword; it can swing both ways. It can either help you to make a lot of money or cause you a huge loss. Leverage gives you access too borrowed money from the broker and this can boost your capital so that you can control a huge position with a very small amount of money in your trading account. Forex brokers offer different leverages ranging from 1:50 to 1:400; some can even go higher than this. Because the broker gives you access to a huge capital does to mean that you should be careless with the use of leverage. You should choose the leverage to use carefully so that you will not end up wiping out your entire account.
One other type of risk you need to be aware of as a Forex trader is a political risk. Politics can play a role in your success or failure when trading in the Spot Forex market. Open of the political events that can contribute is election these economic and political issues can have an impact on the investment landscape in any country, including South Africa.
Political instability can occur during an election and this can cause uncertainties in the economy of the country, which will undoubtedly have an impact on the currency of the country. Some of these impacts can be unexpected and they will end up catching the Forex traders unprepared. One of the best ways to guide against these unwanted eventualities is to always be on the look-out for pre-election polling and this will remove surprises as regards the voting results.
Interest rate risk
Every Forex trader needs to be aware of the risks posed by interest rate before they venture into trading. The interest rate is the amount demanded of the borrower to service the loan given by the lender. The lender is the individual determining the service charge or interest rate. If the lender considers the borrower to be a high risk one, the interest rate demanded of the borrower will be higher and vice versa.
The central banks of countries are the ones responsible for determining the interest rates and other monetary policies. Interest rates are set by the central banks to ensure stability and economic growth. Change in interest rate can have a serious effect on the currencies of the countries involved; the effect can either be positive or otherwise. There is a strong relationship between the interest rate and currency exchange rate of a country. If you monitor the interest rate carefully, you will get to understand where big financial institutions are focusing on their asset investment for greater profit.
Exchange rate risk
As a Forex trader, you should bear in mind the exchange rate risk also. Exchange rate risk can be defined as the risk exposure caused by the constant change in the value of a currency. Companies having operations in several countries are among the most affected by exchange rate risk. The change in the exchange rate can affect the margins and profits recorded by the multinational companies in their home countries and other countries where they have business interests.
Credit risk has to do with the possibility that a currency position may not get repaid as earlier agreed as a result of the action of the counterparty, which can be voluntary or involuntary. Banks and corporations are usually affected by credit risk. Credit risk for a trader, on the other hand, tends to be lower.
Volatility has to do with the rate at which the Forex market fluctuates and a Forex trader needs to keep this in mind at all times. High volatility, just like leverage can have either a good or bad impact on the Forex trader’s fortune. If the volatile market moves in favor of the Forex trader, then he will make a profit. The reverse is the case if the market moves in the opposite direction. Bear in mind that the market needs to be adequately volatile for the trader to make a profit. At the same time, a market that becomes volatile against the prediction of the trader can be dangerous to his fortune. Certain factors can result in a highly volatile market and one such is news events. For example, high impact news can lead to high volatility in the Forex market. Volatility during the release of high impact news events can negatively or positively affect the Forex trader, depending on how he manages the trades.
As a Forex trader, you also need to bear in mind the concept of operational risk. Operational risk has to do with problems involving people, systems and internal processes caused by the Forex broker or even you. Operational risks can also involve security, fraud and legal issues. Your fund will be in danger if your account details are revealed to unscrupulous elements. Your failure to secure your login details can also expose you to operational risks. Registering with a broker that fails to secure the trading platform is yet another course of breech and can lead to the complete loss of your funds. This is one of the reasons to choose your brokers carefully. You should steer clear of any broker that has a poor management system as it can negatively rub off on you and expose you to operational risk. This takes us to the next type of risk to be aware of.
Some brokers cannot be trusted and they can expose the trader to risks. Before you register an account with a broker and make any deposit, make sure that you first carry pot adequate research about that broker so that you will not end up with the wrong service provider. Do not register with a broker that has a history of poor customer service; you will be the worse for it if you make that mistake. Bear in mind that the particular broker you register with can determine how profitable your Forex trading endeavor is. One of the best ways to reduce the broker’s risk is to register with a regulated broker. As a Forex trader in South Africa, make sure you only partner with a Forex broker regulated by the Financial Sector Conduct Authority. Such a broker can be trusted to have your interest at heart.
There are so many Forex brokers where a South African Forex trader can register out there today. Many of them make great promises that you may find very difficult to resist. You should never allow yourself to be fooled by these sweet promises. Rather, you should carry out an in-depth investigation of the Forex broker and find out if they can be trusted or not before you register with them.
You would have learned a lot of things about Forex trading in the course of this write-up. As a South African, you can make a lot of money from Forex trading. Be that as it may, you can also make a lot of losses. The information provided above will help you to make the right choice among the various Forex broker open for South African traders so that you can trade with complete comfort and confidence. You should never register an account with a Forex broker that is not regulated by the FSCA. Also, make sure you have a very good money management strategy in place so that you will not end up losing your hard-earned money to Forex trading in South Africa.