Trading Companies In South Africa

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Trading Companies In South Africa – For South African traders and investors, forex trading is a legal and regulated way of investing in the foreign exchange market. Read our complete guide for beginners.

Retail Forex is about predicting the rise and fall of currencies in order to make a profit. South Africans can legally trade the forex market through an FSCA regulated forex broker who is authorized to offer derivatives to traders in South Africa. Daily forex trading turnover in SA is estimated to be US$ 19.1 billion per day in 2017. The South African Rand (ZAR) is one of the 20 highest traded currencies in the world with an annual trading volume of US$ 70 billion. in 2016.

Trading Companies In South Africa

Trading Companies In South Africa

It is likely that you will want to start trading forex as an investment tool because of the high market liquidity, 24/5 market hours and speed. But there are many risks associated with CFD trading. We will try to cover everything you need to know before you start selling & how much does it take to get started?

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You may want answers to all your questions, but don’t know where to start? This guide will show you the basics of getting started with forex trading as a complete beginner.

If you are looking for a regulated forex broker in South Africa to trade with, see our table below:

Tickmill is an FSCA approved forex broker. Their spreads are as low as 0 pips + $4/lot with a Pro Account.

Forex trading involves buying and selling global currencies on the foreign exchange market in order to make money from currency fluctuations.

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Simply put, you buy a currency when you think its value will appreciate (go up) against another currency or you sell a currency when you think its value will decrease (down) against another currency. When you exit a trade, the difference between the entry and exit price of the trade determines your profit or loss.

Does that sound confusing? No problem. This guide will show you all the math behind trading. But first let’s know more about Forex markets.

Forex refers to Foreign Exchange, or simply FX, sometimes also called Spot FX, where international currencies are traded against each other.

Trading Companies In South Africa

You may have seen currency ticker symbols such as USD/ZAR, EUR/ZAR etc. when you visit your bank. These are the currency rates from the Forex market.

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Forex is the most liquid market in the world and operates 24 hours a day, approximately five and a half days a week. The daily trading volume of this market exceeds $650,000, making it the largest financial market in the country. The number is so large that a major exchange such as the New York Stock Exchange (NYSE) would have to operate for about a month just to deal with the daily average of the Forex market.

Market participants in Forex include commercial banks, governments, central banks and institutional traders, speculators and even trading companies (who want to hedge their risks or speculate).

If you have ever traveled to another country, you may have converted your local currency ie South African Rand (ZAR) into another currency such as Euro or US Dollar. If you have converted your money before, you have already traded in the foreign currency market.

Let’s imagine you exchange R15 000 for $1000 through your bank or local money changers to go abroad to the US. In this example, you would sell your home currency (South African Rand) to buy US dollars. When you exchange your money for travel abroad, you (through your bank) are making a foreign transaction in the international exchange market without realizing it.

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The rate at which you can exchange one currency for another is called the exchange rate. This rate fluctuates every second as the forces of the Forex market determine the rate.

If the ZAR rate on the live market is R14.70 per USD, then your currency exchange/bank will probably give you a rate of R15 per USD, or maybe even higher. The difference of R0.30 (15.00 – 14.70) between the rate you received from the bank and the actual market price, is the profit of the bank/exchanger.

In theory, retail forex trading through an internet broker is similar to currency exchange, but there is more to it. Don’t worry, we will explain everything in the next chapter of this guide!

Trading Companies In South Africa

In the Forex market, all transactions involve buying and selling of one currency for another, so these are called “currency pairs”.

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For example: USD/ZAR (US Dollar & South African Rand), EUR/USD (European Euro & US Dollar) and so on.

Worldwide, there are more than 100 foreign currencies (each country has its own currency), including 7 majors, 50+ minors and many foreign currencies. It is important to learn about currency pairs, what they are, how they can affect your trade and more, so that you can decide which pairs to trade and which ones to stay away from!

Currency pairs are the quote of one currency relative to another currency. In the Forex market, all currencies are traded against each other and are therefore called “currency pairs”. So when you trade in the foreign exchange market, you are actually trading two currencies at the same time.

For example: USD/ZAR is a currency pair where the US dollar is traded against the South African rand (ZAR). When the price of the USD/ZAR currency pair goes up, it means that the American dollar gets stronger compared to the South African rand, and the same goes if the USD/ZAR pair goes down.

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Here we will explain all the important terms you need to know before you understand more about forex trading. You will hear many of these terms often when shopping, so let’s get started.

1) Base and Quote Currency: In each currency like EUR/USD, USD/ZAR, the first currency quoted is “Base Currency” which is compared to the second currency called “Quote Currency”.

If you hear local business news or a trader talking about currencies like: “South Africa (ZAR) rose above the dollar today, hitting a two-week high of 14.454”

Trading Companies In South Africa

It just means that the South African rand has increased in value compared to the American dollar, where 1 USD is now at 14.454 ZAR.

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2) Buy and sell prices: ‘Bid price’ is the market price at which you can sell the base currency. And the “Ask Price” is the price at which you can buy the first investment of the couple. For example: If you want to sell USD/ZAR, the currency broker will charge you 2 prices, one is the buying price and the other is the selling price. The bid price is always lower than the sale price.

3) Spread: The spread is the difference between the bid and ask price. These are the fees charged by the forex broker for each trade, and it depends on the market volatility and the two currencies you are trading. The lower the spread, the better for you.

4) Pips: Pip stands for Percentage in Point, and is a common term in forex trading. Simply put, 1 pip is the smallest amount the market moves. It is the most common fluctuation of the last decimal points on a currency pair.

For example, if EUR/USD goes from 1.3456 to 1.3459, it will move by 0.0003 pips, which is equal to 3 pips. For currency pairs taken with 4 decimal places like EUR/USD, USD/ZAR, the movement in the last place is 1 pip (1.1000 to 1.1001).

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The brokers define their spread in Pips, and your trading profit/loss may also be in Pips. It is important to choose a broker that charges the lowest spread in pips. We will explain this more in the chapters below. So don’t worry if you don’t understand this yet.

1) Major currency pairs: The major currency pairs are the most traded currencies in terms of global trading volume, and they account for about 70% of the volume.

There are 7 major currencies, and these are usually the currencies of stable and developed economies. Major currency pairs include: EUR/USD (Euro Dollar vs. US Dollar), USD/JPY (US Dollar vs. Japanese Yen), GBP/USD (Great Britain Pound vs. US Dollar), USD/CHF (US Dollar vs. US dollars). Swiss Franc), AUD/USD (Australian Dollar vs. US Dollar), USD/CAD (US Dollar vs. Canadian Dollar), NZD/USD (New Zealand Dollar vs. US Dollar).

Trading Companies In South Africa

2) Small currency pairs/cross pairs: Cross currency pairs are currency crosses in the majors but do not include the USD. They tend to be less liquid and more volatile than the Big Two.

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The smaller currency pairs account for approximately 15% of global forex trading volume. The most important cross pairs are: EUR/GBP (Euro vs British Pound), EUR/JPY (Euro vs Japanese Yen), GBP/JPY (British Pound vs Japanese Yen), NZD/JPY (New Zealand Dollar vs Yen Yen). the Japanese yen), CAD/CHF (the Canadian dollar against the Swiss franc), AUD/JPY (the Australian dollar against the Japanese

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