What is Forex Trading South Africa and how does it work? Is Forex Trading in South Africa legal? How much do forex traders in South Africa make? Who are the best forex brokers in South Africa? All these questions regarding Forex Trading South Africa will be answered in this article as we take a closer look at everything you need to know about Forex trading in South Africa, how to trade forex in South Africa and how Forex leverage works.
ALSO READ: What are the best Forex brokers in South Africa for 2021?
Are you interested in trading Forex in South Africa?
Forex is one of the financial markets that is attracting more and more retail traders and investors in South Africa, with a daily volume of $6.6 trillion, according to the 2019 Triennial Central Bank Survey of FX and OTC derivatives markets and many currency pairs to invest in around the clock.
In this Forex Trading South Africa guide, you will discover the characteristics and the functioning of forex and how to invest in this market through derivatives like barrier products, options and CFDs.
Before we dive more into what is Forex Trading South Africa and how it works in South Africa, we need to explain the definition of what is Forex below.
What is Forex?
The foreign exchange (also known as FX or forex) market is a global over-the-counter (OTC) market, where investors trade global currency pairs at a price agreed in advance. It also allows individuals, businesses and central banks to convert funds from one currency to another.
Basically, this market is used to respond to practical situations such as helping companies that need foreign currency to carry out their international business operations, or individuals who need to change their currency before traveling.
The currency market, also known as the foreign exchange market, FX or currency trading, is the largest decentralized financial market in the world. There is no such thing as a currency exchange like there are other markets such as stocks and indices.
The constant fluctuation of the prices of currencies against each other (in pairs) in the financial market has given rise to forex speculation and trading. Due to the colossal amount of currencies converted every day, the prices of some of them can be extremely volatile. It is this volatility that makes the forex market so attractive to investors, as it offers more opportunities to make gains (but it also increases the risk of loss).
What is Forex Trading South Africa?
Forex trading South Africa is the activity of taking a position on fluctuations and changes in the prices of currencies. Note that currency exchange transactions are a common activity, practiced every day 24 hours a day on a global scale by different entities such as governments, banks and even individuals.
Forex investors seek to take advantage of rising and falling currency price movements, in order to make gains by buying and selling one currency against another, following an economic or chart analysis.
If, for example, a trader expects the dollar to rise against the euro, he will buy the EUR / USD pair. If, on the other hand, he believes that the dollar will rather fall, the investor will sell this currency pair. He makes a profit if his forecast was correct, and he incurs a loss if he is wrong.
If forex is the most accessible market in the world, be aware that this form of investment is complex, difficult to handle and can lead to both gains and losses.
This is the reason why it is important to learn to control the risks of forex, by opting for a broker offering suitable risk management tools as well as a demo trading platform that will provide access to an environment of simulation where you can test your trading strategies.
Who Trades Forex in South Africa?
The most important players in the forex market are:
- Central banks.
- Hedge Funds.
- Brokers.
- The states.
- Investment funds.
- Traditional banks.
- Professional investors and private traders.
Why Invest in Forex Trading South Africa?
By choosing a particular market in which to invest, an investor seeks optimal trading conditions and the best chance of making a profit. Thus, most investors prefer the forex market, believing that it meets these criteria better. Here are some characteristics of the forex market:
- The possibility of opening up and down positions using derivatives
- FX market trading hours
- The exceptional liquidity of the forex market
- Forex volatility
- Leverage to amplify your gains
- Invest in a Wide Variety of Currency Pairs
- Execute Forex Hedging
- Multiple Ways to Invest
How Forex Trading South Africa Works
Forex trading South Africa is characterized by buying one base currency and simultaneously selling another quote currency. If the various forex operations were previously carried out by brokers, it is now possible to take advantage of price movements thanks to barrier products and vanilla options and CFDs through online trading. Here are five essential points to remember about how forex trading works in South Africa:
- Currency pairs on Forex (FX)
- The base currency and the quote currency
- A pip
- A batch
- Margin and leverage
How to Trade Forex in South Africa?
Forex trading South Africa is characterized by buying one currency and simultaneously selling another currency. In forex trading, the trader seeks to take advantage of the upward and downward fluctuation of currencies to make money.
You need to follow the below steps in order to trade successfully at Forex Trading South Africa
- Familiarize yourself with how Forex trading South Africa platforms work or how CFDs work
- Choose a trading strategy that’s right for you
- Start developing your strategy in a risk-free environment with a demo account
- Open a real account and deposit funds
- Search for the currency pair of your choice in the search tab
- Choose an amount you want to buy or sell
- Open your position (s)
Previously, the majority of forex trading was done by forex brokers in South Africa. Now, with the advent of online trading, you can profit from price movements with some leveraged products like options and CFDs. These products allow you to open a position by locking in only a small part of the total capital.
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