What You Need to Know Before You Start Trading In South Africa

Over the past few years, South Africa has seen the rapid expansion of the online trading segment. Modern technical tools and webtrader platforms allow anyone to test their foresight in the global financial markets. Local retail traders buy and sell currencies, stocks, and complex derivatives – all through the Internet. Here is an overview of the current situation with internet-assisted investment.

A Look at the Scope

The pace of growth has been spectacular. It is estimated that between 2013 and 2016, the segment in the subregion expanded from $14 billion to $21 billion. Kenya, Namibia, Angola, Tanzania, Rwanda, and Botswana have seen similar uptrends.

The population of the continent is increasingly interested in profit opportunities on the global exchange. Financial literacy is improving. International brokerage brands are tailoring their services to the region, offering cent accounts and moderate deposit requirements. Other specific benefits include:

  • accounts with the Nigerian Naira (NGN) as the base currency,
  • zero conversion fees for US-dollar accounts,
  • instant depositing options.

The impressive rise of internet-based trading is connected to a number of factors. First, the Internet is well-spread, with 50 million users to date. Secondly, employment opportunities, and thus finance sources for the younger generation are scarce. Thirdly, social media advertising has become more aggressive. Combined with low entry requirements, this translates into the obvious appeal of Forex.

Overview of Regulations

In Nigeria, controls are virtually non-existent, as the Central Bank does not issue internationally recognized licenses. This explains the rise of fraud. For consumers, it is difficult to distinguish fake websites from legit brands without thorough research. Luckily, in South Africa, the situation is different.

The Financial Sector Conduct Authority has taken significant measures to crack down on trading-related cybercrime. The entity imposed licensing for all Forex brokers based in the country. Since the introduction of Over the Counter Derivative Provider (ODP) license, they have to open access to transactions for the authority. Thus, those who want to explore global markets can choose between locally licensed firms and internationally recognized brands.

Overview of Tradable Instruments

A well-established global broker like FXTM allows clients to trade different instruments and manage diverse portfolios. This translates into lower overall risk and higher profit potential. The range of options includes:

  • currencies (major, minor, and exotic pairs);
  • stocks of major world corporations;
  • CFDs on stocks;
  • CFDs on commodities;
  • CFDs on market indices;
  • binary options, etc.

CFDs and binary options are virtual derivatives that allow profit without ownership of physical assets. Contracts for Difference may be tied to different commodities, shares, market indices, or even cryptocurrencies. Whatever the asset, traders do not need to buy it. CFDs are merely agreements concerning its price, and they are bought and sold like other trading instruments.

Basics of Currency Trades

Most beginners explore conventional Forex before adding more tools. All accepted currencies are traded in pairs. Here, the ‘base currency’ is priced against the ‘quote currency’ (aka ‘counter currency’). For example, the value for USD/ZAR shows how many South African rands one US dollar is worth.

Each pair has two prices that are changing along with the market  — Bid (price for the seller) and Ask (price for the buyer). A trader aims to buy or sell currency at the most favorable moment. For instance, they may purchase it while the price is low and sell after it soars.

Exchange rates are always in flux, swayed by different factors from oil prices to wars to fiscal policies of separate countries. Forecasting is based on fundamental or technical analysis. Trading platforms have charting tools, calendars, and other aids that make decision-making easier.

Software and Apps

Traders in South Africa can use advanced trading terminals popular around the world – MetaTrader 4 and MetaTrader 5. Both offer convenient and highly customizable systems with a wide range of tools that facilitate market analysis. Their mobile versions make essential features accessible on the go.

The same refers to apps from licensed brokers, such as FXTM Trader. Through a sleek piece of mobile software for Android or iOS, traders may monitor trends, open trades, and manage their accounts wherever they are. Over 250 financial instruments are easily accessible, even without a desktop computer. Finally, thanks to cross-platform compatibility, positions may be opened through the desktop version and closed via the app or vice versa.

Prospects for the Segment

South Africa is likely to experience a further influx of international brokers. For consumers, the opportunities for profit are vast. However, they should be cautious in their choice of brokerage. International brands overseen by reputable entities like CySEC are the most preferable. Global market dynamics can be profitable for anyone who is willing to learn and works with a trustworthy provider.