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What is Forex Trading?
If you have ever traveled abroad, it is important to note that they have already made a forex transaction. Taking a trip to the country of South Africa will require you to convert your present currency into Zuid Afrikaanse Rand (ZAR) currency. Meaning when an individual does this kind of transaction, they will be participating in a forex exchange, especially since the rate between each of the 2 currencies will be based on the present supply and demand. The supply and demand at this time will determine how many ZARs the traveler will receive for the amount that they are given in U.S dollars. These amounts can also change from one day to the next because the exchange rates will continue to fluctuate. So, for those of you who want to know what trading forex is and what it entails, here is some information that can help to explain what it means. Particularly, as it relates to Forex Trading in South Africa.
FX trading can be described as currency trading that traders in different countries all over the globe can participate in. This type of trading is part of a decentralized global market that involves all of the world’s currencies. Presently, Forex, in this particular market place is the most prominent, especially since it is the largest in the world. With an average value of $5 trillion daily trading volume, it is also the most liquid. Additionally, due to the vastness of these trades, all of the world’s stocks combined cannot compare to Forex.
The History of the Forex in South Africa
Even though some people may only be aware of Forex’s existence since the initial start-up of the Internet, it has been around for a long time. The world wide web has only opened up a vast amount of opportunities for those that want to jump right in. However, the truth of the matter is Forex’s start-up can be traced back to the creation of the gold standard in the world’s monetary system, which began as early as 1875.
However, since that time not all countries have participated in this type of trading. It has only been as recent as 16 years ago that South Africa began its over-the-counter Currency trading activities. This is about the same time in which their local companies begin offering their trades via offshore brokers through the channel of self-directed traders.
Additionally, It was also during this period that there were no regulations that prevented companies or individuals from initiating their own online businesses. Unfortunately, the start-up of these activities was not successful since it lead to hundreds of millions of Rands in investor losses due to fraud. To make sure these issues did not occur again, the appropriate regulations have been established to prevent greed from destroying legitimate Forex trader opportunities.
Why start trading?
When South African investors enter the FX Trading market, they are usually familiar with its initial concept and what this type of market entails. Even though they may not know as much as they want to when they get started, there is one main motivation for joining in with others traders. One of the most important, for most South Africans, is simply making lots of money with as little investment as possible. Because of the vastness of this market and the number of liquid assets that are traded across the table (trillions of dollars in this exchange), these opportunities look very attractive as they are being introduced to this type of investment opportunity.
Many reasons are available as to why more and more people in South Africa are engaging or are willing to engage in the forex trading business. Some of the benefits that come with engaging in this economy include:
- South Africa’s global financial position As aforementioned, trading forex mainly involves the exchange of currencies. As it stands, some currencies are weaker as compared to the stronger ones like the Euros and dollars. However, the South African Rand is not badly off the charts. If anything it is one of the strongest currencies in Africa and ranks high on the global charts. This means that during foreign exchange, the chances of running at a loss because of weaker currencies are minimal.
- Most trading accounts favor South Africans Whether an investor in South Africa chooses to open a trading account with USD, EUR, or GBP, the exchange rates will always favor him/her. This is particularly when withdrawing profits to their accounts. This way, people engage in forex trading without the fear of having their profits cut by a considerable amount due to unforeseen losses.
- Forex exchange in South Africa has a lot of freedom As compared to working in public or private offices, forex trading in the country offers a lot of freedom to the investors. Bearing in mind that one can work from home, people do not have to incur some common inconveniences to their lifestyles such as having to travel every day by road to work, having to meet unrealistic deadlines and there is no boss to report to. If anything, forex trading in the country allows you to be your own boss. This also gives people the chance to manage their time well and be with their families and friends too.
- The trade is well paying While it is true that many people in South Africa are engaging in forex trade as a side hustle, the money they make from the job allows them to settle bills such as water, rent and electricity conveniently. This way, people use it as a platform to gain wealth and better their lives.
- Many options are available in South Africa People who choose to engage in forex trading in the country have a variety to choose from. Today, both the importers and the exporters have options that allow them to analyze the risks and the possible profits before engaging in any of them. This way, they can make informed decisions that in the end will not harm their personal life.
While it is true that trading the forex market, especially in South Africa can be rewarding, the trade also has its downs that the investors come across regularly. Some of them include:
- Brokerage In South Africa, there are many brokers in the forex trade industry. While sometimes the brokers can be useful, many times that the results where they are involved are not desirable. This is because the presence of a broker makes the whole trade not to be transparent and one of the parties or both end up feeling conned. Therefore, looking for a trustworthy broker who follows the rules and regulations in South Africa can be a task of its own.
- The price determination process is very complex Because trading fx involves the exchange of currencies, there has to be a process that determines the prices. This process is however complex because the prices keep on fluctuating depending on the region and how the South African Rand is doing as compared to the other powerful currencies like the Euros and the dollars. In addition to that, the language used is very technical. One which most of South African investors mostly fail to understand leads to losses.
- The risk factor is very high Like in any other business that pays well, the forex trade also has its risk. For instance, a person does not have the certainty of the currency that will give a higher profit. In addition to that, most investors in the country do not have complex knowledge about how the forex market operates making the risk even bigger.
Because of the risks involved, many people do not want to invest more because of the fear that comes with it. The thought of losing a large sum of money at once scares the people of South Africa away. And it is very possible to lose a lot of your money! In the end, it’s all about the Risk/Rewards Ratio and trying to minimize potential loss of money.
What are the rules for engaging in forex trade in South Africa?
For one to engage in this type of trade in South Africa, he/ she must follow the specific set of rules created by the governing body. Some of these rules include:
- The law requires the citizen to find a genuine broker that will aid in the transaction
- There are foreign exchange restrictions that should be followed. Transporting physical foreign money in the country is different from foreign exchange
- For a person to fund his/ her account with more than R1 million, he/ she must first acquire the Tax Clearance Certificate
- To transfer more than R10 million offshore, the person has to first apply to the financial surveillance department
Are there success stories of forex traders in South Africa?
Yes, there are success stories of people in South Africa who have “made it” just by involving in the forex trade business. In this article, we provide you with a story of Sandile Shezi and Mike Ndlovu who have had huge success in the business.
The story of Shezi
Shezi took a step that many people his age would consider daring. With his university tuition fees, he decided to invest in forex trade. At the age of 23, he had already made so much money that he went to the south African’s book as one of the youngest millionaires ever. Today, he is an owner of a famous trading company in the country. Here, he aims at educating more people into accepting that forex trade can be a good idea to invest in. according to him, he comes from a less privileged background and is glad to have made it at such as tender age. Now he is running the “Global Forex Institute“.
The story of Mike Ndlovu
Mike is a recognized writer, trainer and above all a forex trade who works and lives in Cape Town, South Africa. He is considered to be one of the big wigs in the industry because of the huge income that he gets. In 2007, he founded the IFBS Forex Training Academy where he teaches proper forex trading skills. Currently, most people sort after his couching services with his philosophy being to keep it simple.
What are the benefits of forex trade training?
In this field, people do not wake up and become professionals. One has to undergo some training at the minimum. Some of the benefits of undergoing these training classes include:
- Acquire basic skills One of the advantages of undergoing this training is that the people of South Africa get the basic skill required in the field. With these skills, people can be able to make the right decisions based on the fluctuations in the market and in the end minimize the possibility of running at losses.
- Understanding of terminologies The field of trading currency involves terminologies that not everybody will understand. However, by undergoing various training, people can be able to understand these terminologies thereby making their forex trading experience smooth.
- Have the knowledge to make proper judgments Trading is a field that requires proper judgments both internal and external. With proper skills, a person can tell whether a broker is legitimate. The knowledge will also allow a person to work following the law.
People can acquire this training from different occasions such as seminars, books, subscription services, and classrooms among other places.
Forex trading is one of the ways through which people can make income from the side. In South Africa, people continue to embrace the idea as each day passes. Many advantages come with engaging in this activity. For instance, people work from home and do not have to report to any boss. In addition to that, the job can be well paying and there are no time limitations.