Successful forex trading is about more than just picking a currency pair to trade, and trading in South Africa is no different. Successful trading requires time and practice, but once you get the hang of it, you will be able to spot opportunities in the market, and you will be able to manage your trades well enough to make money.
And as with any skill, the more time and effort you put in, the better you will be. Whether you’re a novice or a professional forex trader, the mechanics of trading and using forex software can seem intimidating at first. The good news is that forex trading isn’t rocket science. The good news is that you have access to various online tools that can help you become a better trader.
Choose A Trading Broker
The recent Forex boom over the past decade has seen a significant uptick in interested traders from Africa and South Africa in particular. Some people do not know how the market works, and it can seem like an impossible challenge. If you are thinking about getting into the market, you should have a fundamental understanding of how to start.
Regarding South Africa specific brokers, Forex Suggest covers the top options in detail, and you can read their reviews here and judge for yourself. Among the hundreds of forex brokers available, there are several high-quality ones to choose from, with some being better than others, and some being more trustworthy than others. Finding the best one for your needs can be a complex process, but it doesn’t have to be. If you are uncertain about which broker to start with, there are plenty of sites that cover the top platforms in use.
Understand The Laws And Regulations
South Africa’s financial regulatory body and the South African Reserve Bank has a wide range of rules for forex brokers to adhere to. The rules ensure that both the brokers and the clients have confidence in the system.
The rules also ensure that the brokers and the clients are on the same page regarding the risks involved. In South Africa, forex trading is currently regulated by the Financial Market Act (FMA) and the Financial Markets Act (FMA).
They developed these acts in 2008 to protect the public and ensure that forex trading remains fair and managed. Although the Financial Sector Charter (FSC) aims to regulate and police the financial sector in South Africa, it does not cover forex trading.
While it is perfectly legal to trade in South Africa and there are no specific laws surrounding the activity, there are strict laws governing money laundering. This type of illegal activity will not affect you, but you need to be aware of the limits and what documentation you must provide.
Along with most countries worldwide, South Africa has signed up to the Know Your Customer (KYC) guidelines to prohibit anonymity. Therefore before you can begin trading, you need to prove your identity, usually with a photo of your passport and some form of documentation proving where you live and proof of your income. This last step can sometimes prove frustrating for those in unofficial employment; however, it is necessary if you want to trade within the law (which you do want to).
Fund Your Account
Once you have set up your account and complied with all KYC guidelines, the next step is to fund your account. This can be straightforward or slightly difficult, depending on how you are going to finance it. If like most South Africans, you have a credit card linked to one of the top banks like Standard bank Group or ABSA Group, then you should find it uncomplicated to deposit money into your trading account. Fortunately, since 2010, the South African government has made it much simpler to move currency around and even moving it offshore.
As a forex trader, you should be aware that you need to have trading capital to be successful. The smaller the trading capital is, the harder it will be to get a profit with foreign exchange. The bigger the trading capital is, the easier it will be to get profit. However, you need also to be aware of the upper limit allowed in South Africa, which is set at 10 Million ZAR. While most traders won’t come close to this level, if you plan to trade more than this amount every year, you’ll have to send a request to the Financial Surveillance Department of South African Reserve Bank for permission.
There is a workaround to this which involves setting up an offshore account from which you will fund your Forex investments. This enables you to skip going through the entire process of approval and clearance each time you want to use another brokerage. Nevertheless, this is not really in the spirit of the law, and if you go down this route, you should make sure you comprehend what you are doing.
Research and Trade
Once your brokerage account has been funded, the next step is to research the pairs you think will be profitable and get trading. If you are a beginner, there are some basic steps you should follow to improve your odds.
- Know the market: It is essential to know which pairs to follow and see what worldwide events may affect them.
- Create a plan: You should make a plan of action and stick with it. This could be the level of risk you are willing to tolerate and how much you are prepared to lose before throwing in the towel.
- Practice: You can test the waters by initially only spending a small amount. You can make it a percentage of what you aim to invest in the future, which will allow you to see the resultant profits and losses.
- Remain Calm: Forex is not for the fainthearted to succeed; you must be able to leave your emotions at the door.
Trading in South Africa is similar to trading in other countries. The main difference being the regulations surrounding the prevention of money laundering. Nevertheless, as long as you can prove who you are and where you live, you should be able to trade without any hindrance. To be successful with trading, you should do your research and know where your limits lie.