How to start trading Forex in South Africa as a beginner

How to start trading Forex in South Africa as a beginner

So you want to start Forex trading in South Africa for beginners and wondering where to begin? Then this guide is what you need to achieve a successful career in Forex. Let’s dive in and find out the exact steps to become a profitable Forex trader from South Africa.

Main reasons to start Forex trading as beginner in South Africa

In recent years Forex trading has become very popular in South Africa, and there are several reasons for this trend:

  • High liquidity – Forex is the most liquid market in the world as it is the money itself that is traded and exchanged. What this means for traders is that they can quickly buy and sell any currency pair, and the market won’t be affected by it. 
  • Accessibility – It requires a smartphone and a decent internet connection to trade the Forex markets, which is very comfortable for beginners. Forex trading is accessible from anywhere, making it a fast and reliable endeavor.
  • 24/5 trading – Forex markets are open and trading 24 hours, five days a week, making it very flexible to any time zone without interrupting a healthy sleep schedule. 
  • Low transactions cost and high leverage – It is cheap to trade Forex markets when the proper broker is selected. Many brokers offer considerable leverage, enabling traders to trade Forex with a relatively small budget, which is excellent for beginners. 

The fact that it is possible to be sitting on your chair and making more than average salary in your country with much less effort makes Forex trading very attractive. So, how does Forex trading work in South Africa? There are several steps before traders can make consistent profits in these turbulent markets. 

Step One: Selecting a Forex Broker in South Africa

To learn how to trade Forex in South Africa, there are several things to consider, including the regulated broker who supports your payment systems and is operating in your area under South African authority supervision. Many reliable Forex brokers provide beginners with free demo accounts and abundant educational resources including ebooks and webinars. These resources are invaluable for beginners who want to learn Forex trading but do not know where to start. The Financial Sector Conduct Authority (FSCA) of South Africa is the main overseeing body of Forex brokers in the country which is also a very reputable regulator. Any broker under an FSCA license can be considered worthy of checking. Ensure they also offer educational resources, a multilingual website, and a free demo account. Make sure the broker you selected is not only regulated by the FSCA but has a multilingual website and support to contact the broker directly and get all the support you will need. Some brokers like XM, CM Trading, and Plus500AU offer abundant resources and multilingual support with live chat. These brokers also support locally popular payment systems in South Africa, including bank cards and E-wallets. The main characteristics of the Forex brokers for beginner traders should:

  • Regulated by South African FSCA
  • Have decent leverage of at least 1:30
  • Has low spreads and commissions
  • Low minimum deposit requirements
  • Educational resources including webinars and video tutorials
  • Has a glossary for important terms
  • Offers multilingual live chat and website

The brokers listed above and many other well-established brokers offer all these competitive conditions to South African beginners. 

Step two- Forex trading education South Africa

Quality Forex trading education in South Africa is as important as in any other country as it defines if a trader will be profitable or a loser in the long run. No matter the field and profession there are first steps no one can avoid: learning the basics of the industry. This is an essential step where traders learn about Forex markets and their specifics. Without a deep understanding of how Forex markets operate and who its participants are, it will be much harder to make sense of its price movements. Forex consists of international banks, hedge funds, multinational corporations, and retail traders who are all trying to buy or sell at a favorable price. Banks are providing services to exchange one currency for another to their clients who are big hedge funds and corporations. When a company is operating in several countries they need to constantly exchange currencies to give salaries or buy commodities to make their products. Retail traders are trying to take advantage of the price inefficiencies as a result of these activities and make a profit by buying cheap and selling high or vice versa, selling high and buying cheap. The main advantage of the Forex market is that it allows traders to short-sell the currency pair they think will fall in price. Forex is the biggest financial market in the world with trillions of dollars traded every day. It is very tempting to become part of its huge list of buyers and sellers to make a living. The advantage of Forex markets is that there is always someone who wants to buy from you even at a much higher price, which gives the Forex market the highest liquidity.  Many brokers offer a trading education that can help beginners in understanding the ins and outs of the Forex market and lay a foundation for them to become successful traders. But not all broker’s educational materials are enough to master trading. 

Fundamental and Technical Analysis

Before opening any position it is important to analyze the markets and conclude what price is doing. There are two types of analysis traders use daily to conclude the market direction. Fundamental analysis is an analysis of macroeconomic factors such as news events and major global political events. Fundamental indicators such as inflation rates, interest rates, unemployment rates, GDP, and other indicators can have a major impact on price fluctuations and some of them can even reverse ongoing trends. One useful tool for fundamental analysis is to have an economic calendar and watch for high-impactful events. Many brokers offer inbuilt economic calendars on their websites and trading platforms like TradingView also have upcoming news events on the charts to make trading easier. The economic calendar is the main tool that can assist you to learn how to trade Forex in South Africa. Make sure to use this tool to stay informed about upcoming news that can completely reverse the markets. The second type of analysis is called technical analysis and it focuses on analyzing price charts using various tools and mathematical algorithms. Some of these tools called indicators are widely used in trading and many traders rely on them to predict the price and trade markets. It has to be noted that the best results in trading are achieved when both fundamental and technical analysis is used together to define the main direction of the price with fundamentals and then find entry points with technical analysis.

Currency pairs

The main trading instruments of Forex markets are currency pairs. The currency pair consists of two currencies called base currency and quoted currency. Traders buy or sell one currency for another currency. The EURUSD currency pair represents the price of the Euro against the Dollar. In simpler terms, the EURUSD price shows how many dollars you need to buy 1 EUR. This basic premise is the first thing every trader has to memorize. For beginners it is not recommended to start trading FX with ZAR South Africa, as the currency is an exotic currency and it can have super large spreads making even profitable strategies lose money. Because of this reason, it is better for beginners to stick to major pairs. Major pairs are known to be highly liquid and have the lowest spreads on the market. Let’s continue with important forex terms and slang below. 

Basic Terminology – pips, spreads, leverage, etc.

The broker of your selection will also have a Forex glossary containing basic terminology brief explanations. The main terminology is essential for every beginner trader as all educational resources and tutorials are using them. For most currency pairs pips are price movement of the fourth decimal point. For example, in the EURUSD case price movement from 1.0010 to 1.0011 is 1 pip move. Spread is the difference between the Bid and Ask price.

Simply put the Bid is the price at which you can sell to the market while the Ask price is the price at which you can buy the pair. If you see the prices on the charts there are always two slightly different prices for currency pairs, one is when you buy and the other is when you sell the pair.  If the current Bid price for EUR/USD is 1.2000 and the Ask price is 1.2002, the spread would be 2 pips (0.0002). When a trader buys or sells the pair they are immediately paying the spread and trade is opened in a loss equal to pips. The spread is deducted for both opening and closing the position meaning the trader has to pay the spread twice. This makes spreads very crucial in trading and brokers that offer lower spreads are much better choices than brokers with high spreads. Some brokers even offer zero spreads for a little commission which may be preferable to scalpers. Scalpers are traders who buy and sell positions quickly to gain small profits and high spreads can eat up all their profits. All Forex brokers offer retail clients what is called leverage. Leverage is a money credit to a trader during trading activities. You can multiply your capital by the leverage to calculate how much buying power leverage can give you. For example, the most common leverage is 1:100 meaning with a trading account of 100 dollars, you can trade with a 100*100=10 000 USD position. The leverage is a double-edged sword in the hands of a trader and it can amplify both profits and losses. Leverage must be used wisely not to lose too much money quickly. 

Step three – Choose a trading platform

After having a basic idea of what the Forex market is and which fundamental factors affect the prices, it is time to open your first position and learn about technical analysis with a trading platform. A trading platform is a software that provides a live feed of prices and the ability to open and close a trading position. Popular trading platforms for Forex trading include MetaTrader 4, MetaTrader 5, cTrader, and TradingView. The most popular trading platform used by most Forex traders is called MetaTrader 4 or MT4 for short. MT4 is a powerful trading platform that offers advanced technical analysis tools and can be used to even automate trading. By familiarizing yourself with MT4, you can trade with 90% of the brokers as most of them offer their traders the MT4 platform. The main activities South African and other Forex beginners should master on MT4 is to open a position, set stop loss and take profit, and use indicators like moving averages. 

Step four – start trading on a demo account from South Africa

After the fundamental and technical analysis is understood it is important to test your newly acquired skills in the Forex market without risking real money. A demo account is a trading account just like the live account but the funds on a demo account are virtual or fake. This way, traders can open and close trading positions in live markets without risking real money. The demo account is one of the main tips to start Forex trading in South Africa as it is a cornerstone of a successful Forex trading experience. It has a great advantage for beginners as they can start trading and learn the basics of opening positions, setting the stop loss, and take profit orders. Stop loss will limit losses by closing the opened trading position at certain points. Take profit will close the position when a certain price is hit and the position is in profit. The demo account is very useful for developing comprehensive practical skills to operate a trading account and it should also be used to develop a trading strategy and test it on historical data and then trade demo to test it in a live market environment. 

Step five – Live trading

After the demo account comes the live trading. Start low and be disciplined to develop your trading skills and psychology. To learn how to trade Forex in South Africa successfully without breaking the bank it is necessary to not open a big live account. Go with a very small trading account and learn trading skills first.  Be consistent and execute trading strategy. Trading strategy should include rules about opening and closing trades, as well as risk management. It is essential to create a trading strategy that has clear and logical rules that are objective and then execute this trading strategy. After about 25 trades it is a good idea to analyze trading performance and conduct a trading journal with all trades documented. With trading journals, you will be able to find your weaknesses and improve your trading performance with small adjustments. After covering all the steps described in the above topics it is much easier to start Forex trading in South Africa as a beginner and achieve financial freedom. 

FAQs on how to start trading Forex in South Africa as a beginner

How to start Forex trading in South Africa?

The first step to start Forex trading South Africa is to find a reliable broker preferably regulated by the local authority of FSCA. Make sure the broker offers educational resources and has webinars and various video tutorials to make yourself familiar with the Forex market. Use educational resources to make sense of Forex markets and their mechanics. Then use the demo account and test your skills. Develop a trading strategy and start with a low budget and improve your trading skills consistently. 

What do you need before starting trading Forex in South Africa?

Education and practical trading skills are the most essential thing about Forex trading. After education, the most critical thing is to find a reliable Forex broker that is regulated by South Africa FSCA and open a demo account to translate all the education into practice. 

Should we start Forex trading in South Africa?

It is essential to start South Africa FX trading by getting the best Forex education. It is possible to become a successful Forex trader while living in South Africa as the Forex markets can provide much more profits than the average salary. The first thing is to get an education and then translate it into practical skills. 

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