How does forex trading work in South Africa?
Before choosing one of our top forex brokers in South Africa, it’s important to look at how the foreign exchange market works. To get started, here are four top facts about forex trading in South Africa:
- South Africa is home to over 200,000 forex traders
- The South African forex market has a daily trading volume of around $2 billion
- The South African Rand is the most traded currency in Africa, and the 18th most traded in the world.
- Many of the world’s leading FX brokers have opened offices in South Africa, including Saxo Bank, HotForex, and IG Markets
In most ways, forex trading in South Africa works as it does anywhere else in the world. You buy or sell a currency pair, depending on whether you think its value is about to rise or fall. Then, once the value has changed, you buy or sell again to create a profit.
With the best South African forex brokers, you can trade around 50 currency pairs. This includes pairs involving the Rand, such as USD/ZAR and ZAR/JPY. You can also trade the world’s most popular pairs, such as the USD/EUR and GBP/EUR.
What are the advantages of trading forex in South Africa?
Although the basics of forex trading are the same no matter where you are in the world, there are some distinct advantages to trading in South Africa.
- South African traders have the freedom to choose between domestically licensed brokers and offshore firms. This gives you more choice than traders in other places and means the market is highly competitive. As a result, you needn’t settle for anything less than an excellent trading experience.
- The competitive market also leaves little room for rogue operators. The Financial Sector Conduct Authority of South Africa (FSCA) is one of the top regulators in the world and any offshore firm needs to match this level of safeguarding to contend.
- Though the USD/ZAR (South African rand) is an exotic currency pair, it is among the top 20 most traded currency pairs. This means it has higher liquidity levels, and lower spreads, than other exotic pairs.
- Unlike other regulators, such as the FCA or CySEC, the FSCA doesn’t prohibit brokers from offering you bonus promotions. Whether it’s a deposit or a referral bonus, you’ll gain rewards for trading with the best forex brokers in South Africa.
- Many South African forex brokers provide you with a diverse range of trading instruments, besides currencies. This can include stocks and CFDs on commodities, indices, and cryptocurrencies. You needn’t find another broker to diversify your portfolio.
- As a South African forex trader, you can take advantage of high leverage rates. Since this can increase your risk, however, the best forex brokers in South Africa also offer negative balance protection.
What do I need to trade forex?
To trade forex in South Africa, you need:
- A well-regulated local or offshore forex broker with great trading conditions, platforms and tools.
- Documentation to verify your identity.
- An initial investment of at least R 7,000.
- An understanding of the risks involved with forex trading, and how to avoid them.
To learn more about each of these requirements, continue reading our expert advice.
Is forex trading legal in South Africa?
Forex trading is completely legal in South Africa, so long as you do not break money laundering laws and declare any profits to SARS (South African Revenue Service). Whilst the FSCA regulates all forex brokers in the country, it’s also legal for you to trade with overseas companies.
What is the role of the FSCA?
The Financial Sector Conduct Authority (FSCA) closely monitors all forex brokers based in South Africa. Thanks to its strict safeguarding polices, it is one of the world’s best regulatory authorities.
The FSCA launched in 2017 under the Financial Sector Regulation Act 9, replacing the Financial Services Board (FSB). Since then, brokers with FSCA regulation must:
- Keep all client funds in segregated accounts.
- Submit regular audits.
- Apply for an Over-the-Counter Derivative Provider (ODP) license.
- Conduct due diligence on new traders to ensure they have adequate capital.
- Report every transaction made to an authorized trade repository. Reports must show the names of the parties, the underlying asset, and the margin.
The FSCA also maintains a public register of all companies with a financial services provider (FSP) number. You can use this to check the status of all FSCA-regulated brokers and what products they can provide.
These policies give you access to transparent information about how a brokerage operates and how it handles its clients’ funds.
Trading with offshore brokers in South Africa
If you choose an international forex broker operating in South Africa, it may not hold a FSCA license. To remain safe, it must boast regulation from another top-tier authority. Currently, the most trustworthy global regulators are:
- Financial Conduct Authority (FCA) of the UK
- Cyprus Securities and Exchange Commission (CySEC)
- Australian Securities and Exchange Commission (ASIC)
- Federal Financial Supervisory Authority (BaFin) of Germany
Any broker operating with a license from these regulators must follow similar, if not stricter, guidelines as FSCA-licensed brokers.
There are some limitations with offshore brokers, however. For example, EU and US-regulated brokers have a maximum leverage cap of 1:30. The Reserve Bank of South Africa also limits the amount of money you can invest outside of the Common Monetary Area (a monetary union between South Africa, Namibia, Lesotho, and Eswatini).
You can make individual offshore transactions below R1 million per calendar year with no documentation required. If the investment amount exceeds R1 million, you must provide a Tax Clearance Certificate. The maximum amount you can invest abroad is R10 million.
What other features do the best South African forex brokers offer?
A sturdy license should always be your top priority when looking for forex brokers in South Africa. For us to consider a broker to be the best of the best, however, it must also offer a plethora of other appealing features.
Our testing process considers a variety of trading conditions. Whether you’re looking for fair commission levels, diverse trading instruments, quick payment methods, or overall prestige, we’ve got you covered.
When choosing our best forex brokers for South African traders, we look for:
- Great international reputations – Besides strong regulation, the best forex brokers should have a clean history and great testimonials. We dig into the background of each broker and consult current clients to get an overall picture of their reputation.
- ZAR-based accounts – Opening an account with rand as the base currency saves you time, money, and stress. You needn’t worry about converting currencies, and it’s much easier to understand how the numbers on the screen relate to your profits. Although not all of recommended brokers offer this feature, we give priority to those that do.
- Localized payment methods – When we test forex brokers in South Africa, we use our own funds and various methods. Brokers who offer quick deposits and withdrawals, via South African banks and payment providers such as PayFast, PayGate, and DPO Africa, score higher.
- Good spreads on ZAR currency pairs – If you trade what you know, you have a higher chance of success, especially when you’re starting out. To allow you to make trades based around South African economic news, we look for forex brokers with low spreads on pairs such as USD/ZAR and EUR/ZAR.
- Other South African trading instruments – No matter your skill level, you want to choose a forex broker that offers you opportunities to diversify your portfolio when the time is right. When choosing our best forex brokers for South African traders, therefore, we look for those that offer other familiar instruments. These include shares in JSE-listed companies, such as Prosus and AB InBev, commodities like platinum, coal, and diamonds, and even cryptocurrencies like Bitcoin and Litecoin.
- Efficient trading platforms – As this is the software you use daily, we only select forex brokers with top trading platforms, such as MetaTrader 4 and 5, cTrader, and WebTrader. If a broker offers a proprietary platform, it should come with multiple trading tools, analytical objects, and mobile compatibility too.
How to open a forex account in South Africa
Once you’ve selected a broker, the next step is to create a live trading account. With the help of our experts, this process is incredibly easy. Follow the steps below to start your forex trading journey with a South African broker.
- To begin the registration process, supply the broker with your full name, email address, place of birth, phone number, and national identification number. You must also create a password.
- Depending on which authority regulates your chosen broker, you may also need to supply information about your education level, employment status, income, net worth, and trading experience.
- Next, you need to upload a scan of your National ID/passport/driver’s license for identity verification, and a recent utility bill/bank statement for residence address verification.
- Select your account type, base currency, and trading platform. Note, what’s required in this step may vary from broker to broker, depending on what account types they offer.
- Wait for the broker to verify your account. This can take up to 48 hours.
- Fund your account via your preferred payment method. With the best forex brokers in South Africa, you can choose from making a bank wire transfer, a credit/debit card payment, or an e-wallet payment.
How much money do you need to start trading forex in South Africa?
In order to trade successfully and sensibly, we recommend having at least R 7,000 of starting capital. This amount allows you to place reasonably sized trades which generate profits. Anything less and you won’t be able to compensate yourself for the time you spend trading.
Some of the best forex brokers in South Africa will allow you to open an account with far less than we recommend, whilst some will want a much bigger initial deposit. Whilst it’s worth paying attention to minimum deposit limits, so you get the best account type you for your money, you shouldn’t pick a broker based on this alone. Often, they don’t reflect the funds you actually need to trade.
If you don’t have a big budget, start trading with a free demo account first. Whilst using your demo account to practice, build your capital. Once you’ve saved enough, you can trade profitably with confidence.
What is the best time to trade forex in South Africa?
The best time to trade forex is always the time that’s most convenient for you. If you’re restricted by other commitments, the good news is that forex brokers in South Africa allow trading 24 hours a day, from Monday to Friday.
If you have the freedom to choose when to trade, however, do so when the market is at its most liquid. This is when the main trading sessions intersect with one another.
There are four primary forex trading sessions; the Australian session (Sydney), the Asian session (Tokyo), the European session (London), and the North American session (New York). Most South African traders trade within the European session, as South Africa Standard Time is only two hours ahead of London. To take advantage of overlapping sessions, however, we recommend trading between 10:00 and 17:00.
Below you can find the opening and closing times of each main trading session, corrected for South Africa Standard Time (GMT+2).
|Forex session||Opening and closing hours (SAST)|
|Australian session||23:00 – 08:00|
|Asian session||01:00 – 10:00|
|European session||09:00 – 18:00|
|North American session||14:00 – 23:00|
What are the risks of trading forex in South Africa?
When discussing the benefits of forex trading, whether that’s in South Africa or anywhere else in the world, it’s important to consider the disadvantages too.
As the forex market is famously unpredictable, it’s dangerous to trade without an understanding of what risks you may encounter and how to avoid them. Luckily, our experts are here to help:
- One of the main risks of trading forex is high volatility levels in the market. The prices of currency pairs can change rapidly and it’s difficult to predict how they’ll perform. Around 80% of traders lose money when trading forex, and a huge part of this is because of volatility. You can reduce this risk by conducting solid technical and fundamental analysis during trading.
- When a broker offers a certain leverage rate, it’s easy to think you need to use it in full. The higher leverage you use, however, the more damaging it becomes when the market goes against you. With South African forex brokers, it’s even more important to consider this risk, as there are no hard limits on the maximum leverage. The good news is that the solution is pretty straightforward. Turn down the maximum leverage and apply a more reasonable rate to protect your account.
- Low liquidity levels can also pose a threat to your profits, as they can cause higher fees as the broker struggles to execute your trades. Any delays in execution can also cause slippage. To avoid this happening to you, trade within the main sessions.
Frequently asked questions about forex brokers in South Africa (FAQs)
What is the best forex broker in South Africa?
The best forex broker in South Africa is a firm that successfully combines trading safety with customer profitability. This broker must hold a license from a trustworthy regulatory authority, whether it’s the native Financial Sector Conduct Authority (FSCA) or an international one. Any broker that aims to be the best in the business should also offer beneficial trading terms and conditions, including low commission rates, decent leverage, ultra-fast execution speeds, and sophisticated trading platforms.
How do I start forex trading in South Africa?
To trade forex in South Africa, you first need to find a reputable broker with a license from the FSCA, the UK, Cyprus, or Australia. Next, you need to create a live account on the broker’s platform. To do this, you must provide personal details such as your full name, email address, date of birth, residential address, and employment information. You also need to upload a copy of your national ID/passport/driver’s license as proof of identity, and a recent utility bill/bank statement as proof of address. Once the broker verifies your account, the final step is to deposit funds.
Is forex trading legal in South Africa?
Yes, forex trading in South Africa is completely legal, so long as you declare your profits and pay tax accordingly. You must also provide your forex broker with proof of identity to ensure they are not breaking anti-money-laundering laws. Unlike in other countries, trading with an offshore broker is also legal in South Africa.
Which is the best South African forex broker for beginners?
The best forex broker for beginners in South Africa will offer a specific set of features. Besides boasting a license from a top-tier authority, they will also have accounts accessible to entry-level traders. These should offer lower minimum deposit requirements, lower fixed commissions, lots of educational materials, and the ability to use a social trading platform.
Is forex trading in South Africa profitable?
Yes, forex trading in South Africa is profitable. A forex trader with an initial investment of R 7,000 can stand to make R 230 per day. In two months, they would double their capital. To do this, however, you need a strict trading plan and a lot of experience. Practice trading with a demo account first. Once you’re making regular profits with virtual money, you can confidentially invest real funds.