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How To Become A Forex Trader In South Africa
For investors and traders in South Africa, it is legal to invest in the forex market via any FSCA regulated forex broker. In 2017, the daily turnover of forex trading was estimated at around $19.1 billion USD per day in South Africa. It is likely to invest in the forex market because of the high market liquidity. The currency of South Africa-South African Rand (ZAR), has been among the top 20 most traded currencies since 2004 in the world with an annual trading volume of almost $70 Billion USD in 2016.
How to get started with Forex
Being a global competition, Forex takes no prisoners. Let’s get started with Forex:
*Connect Online: With a solid internet connection, connecting to
the world of forex and trade currencies from anywhere in the world
*Search the best online Forex broker: By connecting to forex
brokers across the world and taking note of the regulatory bodies
governing those brokers, you can choose your broker. And if you
choose an offshore broker, the south african protections will not
be applied to them.
... * Some regulated forex brokers that accept South African traders:
Hotforex (FSCA regulated), XM Trading, Exness, Forextime,
Avatrade, Fx Pro and so many others.
*Open the account: By following the directions given by your
broker, you can open an account. But make sure you identify
yourself properly and connect your account.
* Fund your account: Funding of account is necessary in order to
make money. Trading career can also be started by using virtual
(not real) money by simply connecting your bank account or funding
can also be done by using a debit card or credit card if the
* Download your trading Platform: A trading platform is the user
interface you will use to make your investments into the forex
* Trade: The infrastructure to trade is ready. So go ahead and
South Africa Forex trading strategies
When it comes to the forex market, mastering more and more strategies is the smartest way to earn profit consistently. So here are some strategies to begin with:
Trading off of price action is basically:
Reading and interpreting charts.
Predicting the next move
Hitting when the iron is hot
Taking profits quickly
The price action trader is more concerned with a currency pair’s pattern of movement.
What are currency pairs?
Trading in the forex market means trading two currencies simultaneously, i.e., all currencies are traded against each other and therefore, they are called currency pairs.
For Example USD/ZAR is the currency pair where the US dollar is being traded against the South African Rand (ZAR). When the price of the USD/ZAR currency pair is rising then it means that the US dollar is getting stronger against the South African Rand, and vice versa in case the USD/ZAR’s pair is going down.
A price action where all the trades close by the end of the day. The trader is protected from big overnight moves by placing limits on the action.
This kind of trading is usually higher frequency than position trading, range trading or trend trading.
Range traders try to take advantage of large patterns by holding a trade for minutes, hours or days and buying at low points of range and selling at high points over and over.
Range trading works when currency has no definite direction and moves within a predictable range.
Trend trading usually takes place over the same time frame as range trading with a major difference in the behaviour of currency pair which unlike the range trading moves in a direction in trend trading.
Currency pairs lingo
Base and quote currency:
The first currency mentioned in a currency pair is the base currency.
And the second currency to which it is compared is called the quote currency.
For example: In USD/ZAR, US dollar is base currency and South African Rand is the quote currency.
Bid and Ask Prices
Bid price is the market price at which you can sell the base currency.
Ask price is the price at which you can buy the base currency in the pair.
For example: if you want to trade USD/ZAR then the forex broker will quote you 2 prices, one will be the bid price and the other will be the ask price. Bid price is always lower than the ask price.
The difference between ask price and bid price is called spread.
Spread is the fees charged by forex brokers for each trade and it depends on the market liquidity and the currency pair that you are trading in.
It is the percentage in points. The change/fluctuation in points of the last decimal for the currency pair and 1 pip is the smallest unit at which the market moves.
For example: if EUR/USD moves from 1.3456 to 1.3459, it moves by 0.0003 points, which will be equivalent to 3 pips. For the currency pairs that are quoted to 4 decimals like EUR/USD, USD/ZAR, the movement in the last decimal is 1 pip (1.1000 to 1.1001).
To select a broker that charges the lowest spread in pips is very important as your trading profit/loss would be in pips and the brokers also quote their spread in pips.
Forex trading platforms for South Africans
MetaTrader (MT4 and MT5)
Because of its advanced charting, multiple time frames and automation features, MetaTrader is the most popular trading platform and it comes with support for PC, mobile and web.
Owned by Metaqueens, this platform provides the following benefits to the traders:
Ability to perform advanced trading operations
Run expert advisors
Copy trades of the other traders
Offers the flexibility to write your own code
Create your own custom indicators and expert advisors.
MT4 or MT5 is provided free by most of brokers.
Here you can open the chart in the browser instead of downloading the software.
Forex trading example in South Africa
Let's say ZAR/USD is trading at 0.5780/0.5790, and you think the price will rise. The margin rate of this currency pair is 3.17% and you want to purchase R150,000. You will only need $275.08 in your account, the broker will let you borrow the rest.
The ZAR/USD price moves up according to plan. After 3 hours, it was trading at 0.06020/0.06040. This is a move of 23 points (0.06020-0.05790) and your profit is (R150,000*0.06020)-(R150,000*0.05790) or $345.
Trading in forex in South Africa along with the pros comes with cons too. Although forex trading gives higher returns, it also has some risks associated with it.
Trading in the forex market offers opportunities to gain incomes but a sound understanding of the markets and a working trading strategy is required.
Forex trading is risky as it is said that almost 75% of traders lose their money and the only way to minimize risk is a good risk management strategy.
A single loss in trade with no stop loss, or without proper money management would also cause loss of your capital along with your mental and emotional health. So it is advisable to understand the market properly and know the risks in the market and the risk management strategies.
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