Forex and CFDs trading has quickly become one of the most popular ways of trading in global markets, especially when the trading opportunities emerged online. Online trading platforms are becoming easier to use every day and platform providers do their best to provide a better overview of the entire trading process. Also, forex and CFDs brokers are regulated entities, which significantly improves trader’s status. Binary Options South Africa puts a lot of effort into providing detailed reviews in order to present the brokers in an objective manner. If you want to find out more about most popular forex and CFDs brokers on the market, make sure to read our article below.
Best Forex Brokers in South Africa
What is Forex Trading in South Africa?
Forex trading is, to put it in the simplest way, an abbreviation for ‘foreign exchange’. Foreign exchange is an exchange among different currencies on global markets. Trading Forex is not a new thing, it has been around ever since the first coins were introduced in 600 BC. However, online forex trading is the relatively new type of trading that managed to establish a solid reputation over the years.
Nowadays, forex is the biggest financial market in the world. Average daily trading volume (ADTV) for forex is around 5 trillion USD, more than any other asset. The reason why forex is dominating the financial industry is quite simple: money is something everyone uses and everyone needs. For example, let’s say you are a sports shop owner in the United States. You want to sell goods that are produced in Germany, which means you have to import them. Of course, United States and Germany have two different currencies: USD and EUR. German supplier will be paid in USD, which means they will need to exchange that currency for their local one. This is only one small example of what happens each day on global markets, not only among small business, but private persons and great industries as well. No wonder forex market reaches such a high volume!
How to trade Forex Online?
Forex trading became popular when it became accessible to a greater number of people. Most people who are interested in any form of online trading, sooner or later encounter forex contracts that are based on currency pairs and the ratio between them. There are many combinations of currency pairs, but keep in mind that not all of them are equally popular or present on the market. Of course, currencies that dominate the forex trading industry are USD, EUR, JPY, CAD, GBP, CHF, AUD etc.
One of the main benefits of forex trading is that it can be done from the comfort of your own home. All you need is a computer, tablet or a smartphone and a good internet connection and you can start trading. Also, most forex trading platforms are also web-based or have special mobile trading apps which means you can trade whenever and wherever.
Online Currency Trading on Forex Platforms
The Internet is literally over flooded by different guides, eBooks, webinars and videos on how to participate in forex trading. Some of those educational materials oversimplify the entire trading process, while others go in depth and can easily confuse beginners who have no trading background and lack basic understanding of technical and fundamental analysis. However, forex trading can and should be learned, but basically it is predicting the movement of the exchange rate. Right prediction makes money, while wrong prediction causes loss.
The best and easiest way to explain basic principles of forex trading is by an example.
Let’s say the trader is interested in a currency pair that is among the most popular on the market EURUSD. The exchange rate for this popular pair is 1.1515 which means someone doing a currency exchange has to give 1.1515 USD (quote currency) to get 1 EUR (base currency). Traders who believe that EUR (base currency) will get stronger in the future should “go long” (buy) the EUR, as they believe the value of this currency will grow. Traders who expect that euro will lose value “go short” and should sell it for some other pair (for example, USD).
It is important to understand how currency market is never static, it has fluctuations and is moving all the time. Sometimes it gets very volatile as well, but no matter how significant the movement is, it is always influenced by several factors and variables, that are out of the trader’s reach of influence.
Let’s get back to our trader from the beginning of the story. For the purpose of this story, we will say that the trader believes that the Euro will grow, and buys 100 EUR for 115.15 USD. Europe gets affected by some significant changes and good news from monetary banks, so EUR gains in value. It shifts from 1.1515 to 1.1540. The change seems almost insignificant to an average person that is not on foreign exchanges. Still, the trader who bought the 100 euros managed to make 0.25 USD. If he decided to sell the Euros, he would make money.
What is Base Currency?
The first currency quoted in a currency pair on forex. Moreover, it is typically considered the domestic currency or accounting currency.
What is a Cross Currency Pair?
A pair of currencies traded in forex that does not include the U.S. dollar. One foreign currency is traded for another without having to first exchange the currencies into U.S. dollars.
What is a Currency Pair?
The quotation and pricing structure of the currencies traded in the forex market; the value of a currency is determined by its comparison to another currency. The first currency of a currency pair is called the “base currency”, and the second currency is called the “quote currency”. The currency pair shows how much of the quote currency is needed to purchase one unit of the base currency.
What is a Quote Currency?
The second currency quoted in a currency pair in Forex. In a direct quote, the quote currency is the foreign currency. In an indirect quote, the quote currency is the domestic currency. In addition, this is known as the “secondary currency” or “counter currency”.
Now that we have reviewed basic terminology, let’s have a look at some of the differences between trading stocks vs. currencies. In currency trading you always compare one currency to another so forex is always quoted in pairs. Occasionally authors of currency research will refer to only one half of the currency pair. For instance, if an article is referring to the Euro (EUR) trading at 1.3332 it’s assumed the other currency is the U.S. dollar (USD). When looking at the quote screen for the first time it may seem confusing at first, however, it’s actually very straightforward. Below is an example of a EUR/USD quote.
The quote example shows traders how much one euro is worth in US dollars. The first currency in a currency pair is the “base currency” and the second currency is the “counter currency” or secondary currency. When buying or selling a currency pair, the action is being performed on the base currency. For example, traders bearish on Euro, could sell EUR/USD. Now, when selling EUR/USD, the trader is not only selling Euro but is also, buying US dollars at the same time. Thus, the pair trade. Let’s say that you sell the EUR/USD at 1.4745. If the EUR/USD falls, that means the euro is getting weaker and the U.S. dollar is getting stronger.
What are Pips?
Pips are the smallest price change that a given exchange rate can make. Pips are a significant term in forex trading, that describes the price movement of 1/10000. In our example, the movement was 0.0025, and the trader from the story earned 25 pips. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point. A common exception is for Japanese yen (JPY) pairs which are quoted to the second decimal point.
What are pips in forex trading?
Remember these 0,25 that were earned as trading income in our example. Traders usually don’t speak in these absolute numbers since exchange rates movements are not that big on a daily or monthly basis most of the time. Each 1/10000 of the exchange rate, they call a pip. Meaning that what was earned in the previous example was 25 pips. This is the way the market expresses movements no matter whether the value is falling or rising.
What is Leverage in Forex Trading?
We will continue with our example. The trader made 0.25 USD – certainly not an amount to be proud of. Some might say that it doesn’t even make any sense. Still, the trader can use the leverage. Leverage is allowing traders to make more money in their trades and literally serves as a lever that allows them to multiply their profits as they have more money at their disposal. Leverage is always expressed as a ratio and is based on margin requirements that are always set by the broker.
So, if the broker offers 1:100 leverage, the trader from our story won’t be trading just 100 EUR, but 10,000, as the broker offered a leverage. Our trader that made 0.25 USD when trading his own money, could have made 100 times more ($25) if he only used leverage.
Traders must put some effort to understand that leverage is not a free money or a free loan. Also, it is no guarantee that you will profit. Traders who use leverage can also lose money. If our trader lost $25, he would get a margin call. This means that the broker can no longer risk the money that was given to you as a leverage. A margin call is an amount that needs to be available on the trading account to execute the trade and cover losses that may occur. If our trader accepted the leverage but didn’t have enough money to cover the potential losses that exceed the initial investment, he would get a margin call.
What is a Spread in Forex Trading?
Another important term in forex trading is a spread. Traders who just stepped in the world of forex will immediately notice how to buy and sell price are never the same. The highest price that is set for selling is also called ASK – the asking price, while the highest price someone is ready to pay for the same asset in order to buy it is a BID price. The spread is the difference between the ASK and the BID price. Keep in mind that the bid is always lower than the asking price.
Again, we will explain spreads in forex trading by using an example.
Let’s say the trader is buying EURUSD pair. The trader is ready to pay a certain price, 1.1234 (the asking price), but the trader that is selling it can do so at 1.1230 which is the highest bidding price. This also shows how traders who try to buy and immediately sell will be in a somewhat worse position as they will lose the initial investment, in this case – 4 pips. The spreads are not fixed and can fluctuate depending on the market volatility: it is wider when there is not a lot of liquidity on the market. Also, the spread is fluctuating during the trading process, so traders should act swiftly and mindfully to take advantage of market movements. Some brokers, both forex and CFDs brokers, will offer fixed spreads to help traders gain more control during the trading process as they have stable costs.
The spread is also the cost of using a broker.
What Is Binary Option In Forex
From the moment it appeared on the global market, binary options trading drew a lot of attention from all around the world, South Africa included. For the first time people from all walks of life gained entrance to the world of financial trading which had been, for a long period of time, reserved for a particular group of individuals or firms. To highlight differences between binary options and forex, we have decided to present what are the major differences between binary options and Forex.
The major difference which most traders, in South Africa and around the world, find to be a very appealing aspect of binary options trading over Forex is the fact that they know how much they stand to gain, and, more importantly how much they could lose as well. So, limited and defined loss enables traders to know from the very start the maximum loss which can happen when they buy a binary option.
While it is possible to use Stop Loss with Forex trading, that feature demands high discipline from the trader which is sometimes hard to achieve since traders sometimes feel the need to remove this feature if they feel the market is going in the desired direction. This can lead to more losses than initially expected. On the other hand, those South African traders who opt to do binary options trading have a fixed loss without possibility to lose more.
Also, volatility of market does not effect binary options as long as the trade achieves “in the money” status by the time the expiry date is reached. With Forex trading the story is different since high market volatility can lead to complete loss of funds.
Yet another difference between binary options and Forex is in the trading speed. Specifically, in the fact that binary options trading allows for extremely short expiry times which can, in fact, be as short as mere 30 seconds. This is not an option in Forex trading since the market is unlikely to move in a matter of minutes, not to mention seconds. Since binary options payouts move between 75% all the way up to 90% traders can end up with a fine profit in a matter of minutes.
The nature of binary options trading does not require that traders be stuck behind a computer screen day in and day out in order to have a successful trade. Traders can simply place a trade and then wait for the expiry time knowing that the loss, if it happens, is the same as the price of the option. South Africans can also forgo the constant following of market news which is a necessity in Forex trading if profit is to be made.
However, it would not be wise to disregard the power of knowledge as, the more traders know the better they can be in predicting what will happen with a price which can lead to higher profits. Inspecting both Technical and Fundamental Analysis is also important and can contribute the overall result in trading binary options. Regardless of the trading journey South African traders might select, investing some time in studying the market, data connected to either binary options or Forex as well as training themselves to react rationally instead of emotionally, will aid in bringing about the desired result.
CFD Trading South Africa
There is no difference between CFD trading in South Africa and other parts of the world. There is an increasing number of South Africans who see an alternative in CFD trading in comparison with traditional approach of online trading.
With CFD, traders can decide which assets to trade with and click on Buy or Sell option. Accordingly, they’ll know what would be potential money gain in case of correct prediction. South Africans are able to invest in:
- Currencies: USD, ZAR, EUR, JPY, GBP, CAD, AUD…
- Commodities: Gold, Silver, Oil, Coffee…
- Stocks: Google, Nike, Facebook…
- Indices: S&P 500, FTSE 100, NASDAQ…
Trading CFDs, South African traders don’t have to set the expiry time since CFD positions do not have them. Also, traders can benefit from financial markets and current trends, depending on the final contract outcome.
What are CFDs and How to Trade them?
Contracts for difference or CFDs are another type of financial instruments. When traders trade the CFDs, they trade on the difference between the strike and closing price of a chosen asset: commodities, indices, shares, treasuries…
To understand CFDs trading, it is important to know the basic terms involved in trading. Just like forex trading, CFDs trading is best described by using an example.
Imagine that you are buying CFDs related to stocks. The strike price is the price of the asset contract when it is being bought. BMW stock price can be $100 at a certain moment, and that is the strike price of the stock. Just like in forex trading, the CFDs trader can either enter a long position if they believe the price will rise and buy the BMW stock position. They can also believe the price will fall, go short and then sell their position. If the trader did the right move by trading CFDs, their profit will be calculated as the difference between the strike price and closing price (the price at that contract is sold). Traders who made a wrong prediction lose the same amount from their trading balance.
CFDs Contracts Explained
CFDs trading offers greater asset variety than forex trading that is based on currencies. CFDs contracts can be based on more different asset types – commodities, stocks, bonds and many other instruments can be underlying assets in the CFDs trading, which means that traders can easily create very diversified trading portfolio they will use to access global markets. The list of underlying asset can be found on every trading platform and with every broker. It is no secret, so make sure to check it out before you start CFDs trading or even make a deposit with a CFDs broker.
How to trade CFDs?
CFDs trading is not very difficult to understand, especially for traders who already encountered forex trading. Just like in forex trading, in CFDs trading, you can buy or sell a contract, based on the speculation of the price of the underlying asset. The trader who believes that the price of gold will rise, can simply go long and buy contracts. If the trader believes the opposite, he will simply go short and sell contracts. The trader that makes the right move at the right time, gets the price difference added to their balance. To put it simply, the main difference in forex and CFDs trading is in the underlying asset.
CFDs trading Example
Let’s say you want to start CFDs trading. You are convinced that the price of XYZ stock will rise soon. For this reason, you buy contracts. Of course, you can’t buy the actual stock, as it is much more expensive, so you buy the CFDs contracts.
The next step I that you use the leverage if you like. The CFDs broker is offering you 1:100 leverage, you accept it and buy 100 contracts. As times go by, it turns out you were right and the price of XYZ stock is now 105 USD. The price difference ($5) belongs to you, and as you accepted leverage offered by your broker, you made $400. Keep in mind that you have to pay back for the leverage.
Difference Between CFDs and Forex
Even though CFDs and forex trading seem like the exactly the same thing, they are not. There are some differences that traders need to understand.
The main thing they have in common is that they are accessible to everyone. You can speculate on the prices from your own home, and from any device that supports online browsers or mobile apps. Also, compared to binary options, forex and CFDs offer more efficient money and risk management, as there are no unpleasant surprises in the last second. Binary options are more dynamic, but also a lot riskier because of expiry times. In CFDs and forex trading, everyone can close the position when they think the time is right as there is no timer ticking. Traders can lock in profits when they make that decision based on the market movements.
Best CFD Trading Platform South Africa
There are several things you need to know and understand before choosing a CFD trading platform. First and foremost, know that forex and CFD trading platforms are companies that offer services of trading. They allow you trade on markets you couldn’t access without them. Every trader has to make an account and make a deposit in order to trade.
But not all trading platforms are made the same. One of the main things to keep in mind is that it is the best solution to open an account with a regulated broker. Regulated forex and CFDs brokers have all necessary licenses for operating their business and offer a higher level of customer protection. Regulated forex brokers usually have clear terms and conditions and treat their customers better. Make sure to check out whether the broker is regulated or not before making a deposit. Sometimes brokers have more than one license for different markets, so don’t let that confuse you.
In the text that follows you will find out more about different regulators.
Forex trading in South Africa – FSB
South African traders will be happy to know that their local regulator, the FSB is also providing the proper regulation. The FSB or the Financial Services Board of South Africa regulates several brokers, Markets.com and CM trading, among others.
Cyprus Securities and Exchange Commission
Also known as CYSEC, Cyprus Securities and Exchange Commission is one of the most recognized regulators in the forex and CFDs industry as they regulate brokers that are interested in the EU market. This regulatory body is also in charge of binary options regulation, and provide licenses while implementing high customer support standards at the same time. Some of the brokers with CYSEC license are IronFX, IQoption, BDSwiss, and others.
Some other regulators that are present in the forex industry are FCA from the United Kingdom, AFM from France, CFTC (United States), ASIC (Australia), Finma in Switzerland, CONSOB in Italy, etc.
Forex and CFDs Brokers Trading Features
Even regulated brokers have some differences. Not all of them have the same trading assets, software or equally good educational materials. Also, they differ in terms of spreads, minimum deposit requirements, and withdrawing conditions.
When it comes to forex and CFDs trading, there is a great range of minimum deposit amounts and traders can trade for as little as $10, but only with some brokers.
Of course, the more you deposit, the more benefits are offered to you, so traders who deposit larger amounts get a premium treatment. Account packages come in different sizes with each broker, but most of them include special signals, educational materials, and support as well as personal account managers, larger leverages etc. for more expensive accounts.
Forex Trading Platforms South Africa
Forex and CFDs trading platforms are of great importance for all traders. The platform is usually delivered by a special software provider. Even though they highly differentiate in the way they deliver the trading experience, there are some elements that every platform has.
Most important elements of forex and CFDs trading platforms are:
Charts – usually in a very visible place, they allow traders to follow market fluctuations and apply different tools.
Asset list – a long list of all underlying assets available, organized by type. Sometimes traders can create customized lists as well.
Positions frame – place where traders can place their trades and set specifics
History – list of trades placed in the past
Open positions – trades that are currently active
Now we will list some of the most popular forex and CFDs platforms.
MetaTrader4 and MetaTrader 5
Almost a household name, MetaTrader is among the most popular forex and CFDs platforms. The most popular versions are MetaTrader4 and MetaTrader5. This is not a web operating platform, but a platform that requires download and installation to the personal computer. Every trader gets a set of credentials they have to use to log in. MetaTrader is very popular among traders as it delivers a great variety of tools, indicators, and other trading features. Traders can also upgrade their trading software by using special add-ons and plug-ins.
Proprietary Forex Platforms
Sometimes brokers decide to develop their own trading platforms. Some of them need to be installed, while others are accessible from the browser. The quality of proprietary platforms varies significantly.
Web-based Forex Platforms
There are also platforms that don’t require a download like classic MetaTrader does. Such platforms are Sirix, web-based MetaTrader, or iForex. Traders just have to log in with their username and password and they can access worldwide contracts. These platforms are very user-friendly as they allow access from multiple devices, and not only from the one that has software installed.
Forex and CFDs Mobile Apps
Mobile apps have become all the rage in forex and CFDs trading, as they are very convenient to use. After all, we all have our smartphones with us all the time. Forex trading mobile apps can be used on any device that supports them, and allow traders to take advantage of every trading opportunity. Traders don’t have to waste time and sit in front of the computer but can be on the go and master the markets.
Forex and CFDs Trading Assets – What to Trade?
Forex and CFDs trading is impossible without underlying assets. They are contracts, so their value is derived from a certain asset the trader decided to trade. The fact they are contracts, allows traders to skip big investments and high personal brokerage fees that are common in traditional trading. With a minimum deposit of just a few dollars, traders can experience the world of financial trading.
What is interesting about CFDs and forex trading is that there is a great variety of assets available. In forex, that is based exclusively on currencies, these are the most popular pairs: EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CHF, USD/CAD, EUR/JPY, EUR/GBP.
There are also other currency pairs the trader can trade. However, while all brokers offer these basic pairs, more exotic and unusual pairs are not always available with all brokers. Also, not all pairs are made the same, so some get to be more volatile than other. Also, movements in one pair can cause movements in some other pair. Forex trading can be very interesting so make sure to check out all the possibilities.
Currencies are not the only underlying asset available for traders. They can also trade any other underlying asset that is offered as a CFDs contract – wheat, oil, bonds, stocks etc. It is estimated there are over 10.000 CFD contracts available on the market, so just try to imagine the possibilities.
Commodities are usually raw materials and similar p, like agricultural products. Some of the most popular commodities are:
- Crude oil
Stocks are shares of certain companies that listed them on certain exchanges. Also, buying actual stocks can cause changes in the ownership of the company, but in the CFDs, traders are buying contracts and not real stocks, so there is no chance for ownership. Almost all popular companies are listed on most influential exchanges – Mercedes, Apple, BMW, Microsoft, IBM, Coca-Cola, Nestle… CFDS trading opened door to small traders who can’t afford to actually own a stock.
Bonds or – IOUs are issued to define the relationship between the person that borrowed money and the owner of the money. For a person that gave money, it is the right to a certain interest and full amount when the bond matures. They are usually used by governments and companies as a source of financing themselves.
Indices indicate how a certain market is performing. For example, DAX30 shows how 30 biggest stocks in Germany are performing when combined. Indices can also show the performance of stocks and can be traded as any other CFDs contract. With CFDs, you can also speculate on the changes in the index value. Most popular indices are:
- NASDAQ 100,
- DAX 30,
Technical and Fundamental analysis in Forex Trading
Traders are often surprised when they find out how selecting a broker, installing a platform and deciding on the asset is only a half of work done. Also, traders need to apply certain forms of market analysis if they wish to perform well and enjoy all the benefits forex trading can bring. The basic types of analysis are technical and fundamental analysis.
Technical Analysis in Forex Trading
Technical analysis is using the data from the past to predict the performance of the underlying asset in the future. Trading based on historical patterns is frequently used not only among the traders of all kinds but also by financial institutions all over the world. In technical analysis, traders and specialist are always looking for certain forms that prices forms, whether they are head & shoulders, wedges, triangles or any other form recognized as important.
Fundamental analysis in Forex Trading
Fundamental analysis is done based on the major economic news and forces that have a great potential to cause market fluctuations. For example, if a big and influential company goes bankrupt – it will cause significant shifts in the financial market. The same scenario will happen if the company performs unpredictably well. Some of the factors that are taken into consideration during the fundamental analysis are GDP reports, liquidity ratios, inflation etc.
CFDs and Forex trading as an interesting way of trading that has potential to change your life forever. Make sure to read our reviews and get familiar with brokers before making a deposit.
Best Forex Trading App South Africa
There was a time when trading on the Forex markets was the domain of wealthy traders in the World’s biggest financial centres. But thanks to online trading platforms such as IQ Option, this activity is now availablein homes, offices and on the move.
IQ Option South Africa is an online trading platform that can be accessed by a web, desktop and mobile app. This powerful Forex trading interface contains everything you need to start trading. Not only is there a user-friendly trading dashboard, there is a wealth of tools and resources available — which can be used to make the best judgment calls possible.
The Ultimate Forex Trading Platform
There really is no need to go anywhere else if you want to start trading in the global Forex market. IQ Option offers 188 Forex pairs, so you can take full advantage of what is the largest and most liquid financial market in the World.
The IQ Option trading interface consists of a multi-chart layout, and offers a selection of historical data, technical analysis tools and buying and selling options. Set the amount you wish to invest, and choose a multiplier to leverage your trades. There are also volatility alerts, market updates and newsletters to help you make the best decisions possible.
A Wealth of Resources
Forex trading can be a minefield — for beginners and experts alike. That is why IQ Option gives traders a wealth of tools and reference materials. There are expert tips, analytical articles from leading experts and in-depth historical statistics. Users also have the option of honing their trading skills with a free practice account, which can be replenished at any time.
IQ Option isn’t just a powerful trading platform, it is also a collaborative community. Users have access to an extensive library of video tutorials, as well as the opportunity to get advice from more experienced traders. There is a chat interface that allows traders to come together to swap tips and ideas, and users can see which traders are generating the best results.
The biggest testament to the effectiveness of IQ Option’s Forex trading platform is its popularity. There are now 20 million registered users, and more are joining every day. To have such a user-friendly interface and a wealth of resources on one place is very important to both experienced traders and beginners. Once you sign up for Forex trading with IQ Option, there really is no need to go anywhere else.