What is Forex Trading in South Africa? is regulated by the . The FSB now known as the FSCA authorizes offerings of Derivative instruments to traders in SA. Forex trading in South Africa is 100% legal when trading with a regulated and licensed broker. Updated January 2023* An average of around Forex Trading in South Africa For Beginners – 11 Key Points Quick Overview What is Forex Trading – Overview Forex Trading is a network of buyers and sellers, who transfer currency between each other at an agreed price. Forex trading is . which is also commonly referred to as , is a decentralized global marketplace where all the world’s currencies trade with one another. What makes Forex so appealing is that it is one of the most liquid markets in the world with average daily trading amounts In South Africa, more than A simple analogy to help potential traders understand is looking at a retail store that sells its products at a low-price because the store buys in bulk. The process of the store turning over a large number of items to their customers is essentially seen as “liquidity” in a “ “. The Store makes a profit from the low price and the low pricing ensures that their clients come back to shop for more. In previous years Forex was a rich man’s game that was only practiced by wealthy investors and large firms. However, after online took over the markets, Forex trading has become assessable to any retail or individual investor. Currency Trading – How it Works. Currencies are traded against each other as for example, . Currency trading is generally facilitated by global and central banks, with central banks being the core element of the Forex Market. A will buy and sell currencies with the main aim of making a profit. A profit or loss is the difference between the buy and sell rates of the currency pairs traded. Essentially Forex is all about attempting to speculate on the fluctuating currencies between two different countries, as mentioned ith the example above – USD: United States Dollar $ and ZAR: South African Rand R. These two currencies are usually referred to as ‘currency pairs’ and these pairs are made up of the base currency and the quote currency. The first currency (USD in this case) set that appears in the Forex pair is referred to as the base currency and is the currency bought or sold for the quote currency. Some of the most popular include EUR/USD, USD/JPY, GBP/USD, and USD/CHF. Forex Trading Risks – Revealed Any type of trading has its own risks and Forex Trading should not be approached lightly. Potential traders should arm themselves with all the knowledge, tips, and expert advice available. The main risks include: The interbank market is highly regulated, however, are not standardized, and in some places around the world Forex trading does not fall under any form of regulation. are regulated in order to undergo regular audits, to communicate certain changes of service to their clients, and much more. This ensures that currency trading is ethical and fair for all involved. This is 100% the traders’ responsibility and self-education can be the difference between profit and loss. Traders must fully understand what drives currency movement, the economic and political landscape in those economies as well as global events, to name a few. Most leading Forex Brokers will make educational materials and tutorials available. The Forex Market – At a Glance. One of the most unique and interesting aspects of this international marketplace is that there is no official central market for a foreign exchange like with Stock Exchanges. Instead, currency exchange is done electronically, which means that all the transactions occur over global computer networks between various traders in different locations around the world, instead of one centralized exchange. The is open 24/7, (5) five and a half days a week, with hubs in some of the major financial centers in: Across almost every time zone in these locations, trading is conducted. This means that when the trading day in the U.S. for example ends, the Forex market begins again in Tokyo and Hong Kong. Here is a Quick overview of terminology Forex traders will come across in their trading journey. It is extremely important to understand the language spoken in the Market as any misunderstanding can and will cost an investor in currency. Forex Quote In Forex trading investors will come across the terms – ‘ ’ and ‘ ’ price. The bid is the price at which a trader can purchase the said currency, whereas the asking price is the price at which you can possibly sell it. Forex Spread The spread refers to the difference between the bid and the ask price of a currency pair. For example – If the bid price is 101.15 and the asking price is 101.20 the spread is 5. A spread is measured in pips, so this would be called a 5 pip spread. Forex Instruments A is a financial medium used in a financial market. One of these instruments is called a Swap. Currency swaps are the most common type of forwarding transaction agreement. A swap is a trade between two parties where they exchange the principal amount of a loan and the interest in one currency, for the same amount in another currency. Leverage , also known as margin, is the percentage or fractional increase an investor can trade from the amount of capital they have available. Leverage will allow investors to trade speculative values far higher than the capital they have available. Simply put – Leverage is borrowed capital within a live trading account. Long/Short Positions A refers to the purchase of an asset, with the anticipation that its market value will rise, whilst a refers to the sale of an asset, with the expectancy of its market value falling. Pip or refers to the smallest price movement any can make. A Pip measures the amount of change in the exchange rate for a currency pair in the forex market and is the fourth and final number after the decimal point. Market profit and loss are quantified by the use of Pips. Lots Forex is traded in and a lot measures the amount of a deal. A standard lot is equal to 100,000 units of the base currency, a mini lot has 10,000 units and a micro lot – has 1,000 units. Margin refers to the initial capital which a trader needs to invest in order to open a position. Margin will also offer traders the opportunity to open a larger position size. When an investor trades with a margin, they will only need to put forward a percentage of the full value of a position in order for a trade to be opened. Profit/Loss The or in Forex is realized when an investor closes out a trade position. With a Profit the margin balance is increased, with a loss, it is decreased. How to Choose a Forex Broker – a Must Read. Finding the right can be a complicated task. While most may offer the same level of access and qualities in the , the procedures and policies may differ dramatically. Each will represent a different level in the industry. Some will represent a high level of expertise with while other brokers are seen as distant with very little connection on offer. The types of forex are crucial to an understanding before trading. Here is an overview of the available: Dealing Desk (DD) or refer to market makers. Dealing desk brokers or market makers will typically provide investors with and elect to quote above or below real-time market prices at any given time. Choosing to trade with a dealing desk is a wise choice for both beginner and expert traders who wish to avoid direct trading with liquidity providers. Dealing desk brokers customarily receive payment through . No Dealing Desk (NDD) are firms that allow forex traders to have direct access to the interbank market. A reputable will not require the re-quoting of prices and traders will have the chance to trade following any economic announcements without facing restrictions. Electric Communication Network (ECN) are firms that offer and display actual order book details typically feature processed orders plus the offered prices by different banks within the interbank market. Most ECN brokers will offer important information to all Forex Market participants in order to improve market transparency. ECN brokers will allow investors to process all their transactions in the interbank market and charge a commission on each traded volume in order to earn an income. Straight Through Processing (STP) or directly pass trading orders into their liquidity providers and do not interfere in order execution transactions. Most STP forex brokers will work with a selection of liquidity providers, providing their clients with a better chance of success in the forex market. MTF (Multilateral Trading Facilities) An guarantees that both buyers and sellers of financial instruments can collaborate according to non-discretionary rules. Even though an MTF is not a regulated exchange it operates under the same rules ensuring a fair trading system. An MTF exchange guarantees price efficiency and the efficient clearing of transactions. Compared to a traditional exchange, a multilateral trading facility provides traders with greater discretion, faster order execution speed, and reduced . The most common live trading account types will be based on the size of the lots an investor wishes to trade. With this taken into consideration, each different Live trading account will have a different minimum deposit level associated. Here is an overview of the Most Common : are accounts best suited to traders with a small amount of capital. Micro Accounts will allow investors to enter the financial market with a small minimum deposit limit. However, due to Micro Accounts having a low entry barrier, there will be restrictions on an investor’s trading activity. On the plus side, Micro Accounts will help traders to control their risk levels, making these types of accounts a perfect choice for beginner traders. When it comes to a , investors will be allowed to enter into contract sizes of 10,000 base currency units. Similar to Micro accounts, Mini Accounts require a relatively small amount of capital in order to get started. Different brokers will use different names to refer to their . Popular terms include , or . Standard accounts most commonly have a minimum deposit limit of between $100 – $500 and will give users access to standard lots of currency. As a standard account will require a larger minimum deposit in order to trade full lots, most brokers will provide investors with more services and better offerings than those associated with smaller account types. or are generally reserved for investors who have a large amount of capital available. VIP or Pro accounts characteristically have a high minimum deposit limit of around $10,000 and will allow investors to trade standard lots. VIP or Pro accounts are generally also ECN accounts, which means they will allow investors to trade in the market directly. Investors need to note that professional accounts for EU clients are slightly different. A or refers to an account option available to clients who cannot earn or pay the interest due to their religious beliefs. Under Sharia laws, Muslim investors are prohibited from taking or giving interest in any kind of activity. Islamic investors should take note that Swap-free accounts may come with higher trading costs and various restrictions. No fees in the form of interests will apply to Islamic accounts. Aside from Live Trading accounts, most reputable, regulated Forex Brokers will have a Demo account on offer. will allow investors to practice their trading without risking real capital. Demo Accounts are virtual accounts that are loaded with virtual currency, most of which are free to use, but may carry a limited usage period. How to Open a Live Trading Account – Step by Step Example Opening a live trading account is generally a straightforward process and most Forex Brokers will follow a basic sign-up structure. Applicants will need to complete a registration which may include the completion of personal information and financial details. Here is a look at the Sign Up Process as an example: 1. Create Live Account Start the application by clicking on the green “Create Live Account” button located on the landing page or throughout the website in the header of the page. 2. : Registration Form The applicant must start setup by supplying general information including a valid email address and country of residence. 3. : Complete Personal Information The next step will nee more personal information to be added, including the applicant’s direct contact details and identification number. 4. : Adress Details The applicant must complete their address details to move on to the final steps of the registration process. 5. : Financial Information The second last step is to complete Financial details, including the applicant’s annual income and employment history. 6. : Trading History In the final step, Applicants must provide their trading history. Once this step has been completed, the application can be saved and closed. Forex Broker Selection – 3 Key Factors to Consider Broker Regulation The Forex market does not have a central regulator and beginner traders should look for regulatory authorities found in their country of residence. For example, South African Forex Brokers will be regulated by The Financial Sector Conduct Authority or FSCA. Quality of Service It’s extremely important to consider the quality of service offered by a potential broker choice. Services to consider include the trading platform on offer, available trading tools, and customer support, to name but a few. Broker Cost Online Forex trading can and has been a great income-generating activity but making use of the Brokers services will come at a cost. Cost may include a minimum deposit in order to open an account, commission per trade, rollover fees, or deposit and withdrawal charges. First Forex Trade – Step by Step Guide A trading platform refers to the software interface provided by an investor’s chosen Forex broker. A trading platform gives customers to access as traders to the Forex markets. Forex Trading Platforms may be available as an online web-based portal, a mobile app, a downloadable program, or a combination of the three. This will be depended on the Broker chosen. The next step is choosing a currency pair and opening a chart. This is done by selecting a timeframe. A forex chart will graphically illustrate the historical behavior, across a variety of time frames, of the relative price movement between two currency pairs. Next, the trader will add technical indicators to the chart opened in Step 2. The customizable settings for technical indicators will include price, volume, and open interest. The two basic types of technical indicators are: After technical indicators have been set, a trader can prepare to place the order. Orders should be placed according to how a trader aims to trade and how they intend to enter and exit the forex market. After an order is opened, a trader will set its stop loss and take profit levels. This is an optional but highly recommended step to take. Setting the stop loss will limit a trader’s losses in case the market moves in an unexpected direction. In turn, setting a take profit level will ensure that the trade exits profitably once the market makes an expected downward move. The next step is to submit the order and wait for the confirmation screen. The order confirmation screen is extremely important as it serves as a ticket number – which can be used as a reference. The second last step may seem like the easiest step, but it may be the most tedious of all. Step 7 – the waiting period begins. Some expert traders recommend turning off the screen and walking away from the market once the order is entered. And finally, the trade is complete! A trader’s first trade may result in either a profit or loss. Either way, it should be seen as a learning experience. Conclusion Overall, Forex Trading has the potential of being profitable. Novis traders need to understand that Forex is not a get-rich-quick scheme, nor will it be fast money and success and Profitability in Forex can and will only be achieved when an investor understands the Forex Market, Trades with the Right strategy, Selects the right Broker, and makes use of safeguards such as . Disclaimer Frequently Asked Questions Is forex trading a good option for beginners? Forex trading is very often perceived as a way to make money easily, however, it is fair to say that forex trading can be quite difficult and may not be suitable for everyone. How long does it take to study forex trading? Beginners forex traders should take note that it takes more or less one year to learn forex trading. While the technical side can be grasped in a few weeks, elements like psychology of trading and risk management take a lot longer to understand. How important is choosing a forex broker in trading? Forex traders, and especially beginner traders should take special care when choosing a broker, because factors like pricing, execution and even the quality of customer service can make a big difference to your trading experience. Is Forex trading profitable for beginner traders? There are many people who turn to forex trading thinking that there is a lot of money to be made; however statistics reveal that most of these aspiring forex traders fail fast and some even end up losing substantial amounts of money. What are the ways a beginner can teach himself to trade forex? There are plenty of ways you can teach yourself forex trading, etc. with books, websites, videos, forex market colleges and institutions, following well-known successful traders on social media, forex guides, webinars to name but a few. What are the best tips for Beginner forex traders? If you are a beginner forex trader a good tip is to know the fundamentals of forex trading e.g. Educate yourself on the forex market, Create a trading plan and stick to it, Test your trading plan with a risk-free practice account (demo account), Know your limits and when to stop. Don’t let emotion overrun you, Slow and steady wins the race.
Creator :Louis Schoeman
Published on : 2022-12-28 06:40:28
Source :thenewage
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