Forex Trading in South Africa
This guide covers everything you need to know about trading forex in South Africa.
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Have you been affected by the unemployment rise in South Africa? Maybe you’re growing increasingly worried about the longer-term implications of COVID-19?
In South Africa (SA), GDP fell 16.4% in three months leading up to June after strict Covid-19 paralyzed activity. Even before the pandemic hit, SA had already been suffering an economic decline. An economy that is not growing cannot produce enough jobs, and as a result, the unemployment rate is climbing.
With a re-energized forex market offering expansive opportunities, more people are turning towards forex trading to help regain lost income. But traders beware: there has been a sharp increase in online forex broker scams. For this reason, it’s vital to determine whether the broker is regulated by the FSCA, South Africa’s regulatory authority.
So, who are the best forex brokers in South Africa? What are the most effective forex strategies to use? Do you understand the main forex terms and tax implications?
In this review, we will outline our top five FSCA regulated forex brokers in South Africa, based on their regulation, fees, leverage, and more. Following this, we will take you through some key forex strategies and terms, and we will clearly outline the tax implications for forex trading in SA.
Ready to get your forex research started? Let’s go! 🚀
Top Forex Brokers in South Africa
Best Forex Brokers in South Africa 🇿🇦
1. FOREX.com: Best Overall
FOREX.COM is a reputable broker that has been in business for a long time – it boasts strong regulatory licenses, and its parent company, GAIN capital, is listed on the New York Stock Exchange. It offers a pretty wide variety of features, and there’s something for everyone – but the big surprise is that the broker is as accessible as it is.
- Low trading fees
- Large selection of currency pairs
- Strong regulatory licenses
- Advanced charting tools
- Underwhelming customer service
- Lacks fundamental data
First of all, the account opening process is rather simple and straightforward with FOREX.com – it takes three days at the most, and can be done fully online. The minimum initial deposit is very humble – you’ll have to put up $50, or roughly R700 in order to start trading.
FOREX.com offers users a variety of trading platforms – while the venerable MT4 is always a solid choice, we wouldn’t overlook the brokerage’s proprietary platforms either.
Both the desktop version and the web-based platform are quite customizable and offer advanced charting tools, as well as over 90 technical indicators. The one drawback is that the brokerage doesn’t offer fundamental data – but next to all the benefits, it isn’t that hard to overlook one such minor flaw.
As far as investment offerings go, FOREX.com offers clients access to 91 currency pairs, with an average spread of just 1.4 pips for the EUR/USD currency pair. Traders will also have access to 380 stock CFDs, over 4,500 CFDs in total, as well as cryptocurrency.
Another area where this broker shines is education – the platform is full of well-produced content that includes platform tutorials and reading strategies, and they also offer a weekly webinar. Beginners will be pleased to hear that FOREX.com also offers a demo account, allowing you to test their platforms and gain some experience without risking any money.
The brokerage also offers trading ideas, research, and provides market analysis that is conducted by its in-house team of experts.
With a well-rounded package such as this, it’s easy to see the appeal – and that is why FOREX.com takes the number one place in this review.
2. Pepperstone: Best for Fees
Pepperstone is an Australian company and forex broker that offers some CFDs too, and is one of the top rated forex brokers available. Clients can access low average spreads, competitive commissions from $3.50, and no fees on deposits or withdrawals, among award-winning customer service.
- Fast and easy account opening process
- Low forex and equity index fees
- Low trading fees
- No deposit fee
- Quality customer service
- High financing rate for CFDs
- No investor protection for non-EU clients
- Basic news flows, no fundamental data
- No banking license
Pepperstone offers a leverage of up to 1:500 for professional traders and 1:30 for retail. However, we advise traders to carefully consider a leverage that is suitable for them depending on individual needs. With Pepperstone you will have access to over 1,200+ instruments, some CFDs and cryptocurrency.
Pepperstone has a vast forex selection, and a standard CFD selection. A total of 11 cryptocurrencies include Bitcoin, Litecoin, Ethereum, and Dash against the USD. A range of 62 currency pairs are offered, but leverage levels cannot be altered which is a drawback.
While many online brokers will hit traders with some unexpected fees, Pepperstone charges no deposits and withdrawals fees, or inactivity fees. Additionally, the company charges low forex and equity fees, as well as low non-trading fees.
On the other hand, CFD financing rates are high. The two most popular accounts are the Standard and Razor. Spreads with the Razor account start at 0.0 pips, but commissions and spreads will depend on the account you choose.
The Pepperstone customer support can be reached through several channels to receive some helpful and quick responses. Needless to say, there are many benefits with Pepperstone. Interested in signing up? You will need to make an initial minimum deposit of AU$200 (around ZAR 312.12).
Risk warning: Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.6% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
3. Markets.com: Best for CFD Tools
Markets.com was founded as recently as 2008 and is regulated across five jurisdictions. Markets.com charges zero commission fees on CFDs such as forex, indices, and commodities on the Marketsx account. A key distinction between Markets.com and other competitors is the range of trading tools offered on their Marketsx and Marketsi platform.
- Wide range of instruments
- Competitive spreads
- Effective trading platform
- Quick execution
- Well regulated
- Low leverage
- Deposits and withdrawal processes can be lengthy
Markets.com offers 2,200 investments which include forex, equities, commodities, crypto, fixed-income securities, and ETFs. If having a diversified portfolio is a priority for you, you won’t be disappointed.
Markets.com’s standard account is Marketsx, it comes with no commission fees as the trading fees are included in the spreads.
This account will give access to 120 forex pairs, 77 ETFs, 3312 shares, 36 commodities, and 77 ETFs, 7 cryptos, 4 bonds, and 23 asset blends, such as events and sectors. Markets.com offers leverage ratios of up to 1:30, which is relatively low compared to many other brokers in the industry.
Markets.com earns the majority of its profits via spreads. The average spread for the EUR/USD pair is 0.4 pips, The brokerage also charges swap rates for leveraged positions that are held overnight, with specific listed on the Markets.com trading platforms themselves.
Is it a hassle to sign up? Definitely not. The account opening process is fully digital, fast, and hassle-free. Most minimum deposits are $100 or the currency equivalent. Lastly, the customer support team can be reached 24/5 in English, Spanish, French, Italian, German, Bulgarian, and Arabic.
4. FXTM: Best for Leverage
FXTM was established in 2011 and is a leading forex broker. It has grown into a global forex that offers over 250+ instruments, a range of account types, in addition to forex contests and forex bonuses.
- High class customer support
- Fully online account opening
- Range of quality educational tools
- No deposit fee
- Inactivity and withdrawal fees
- Limited product portfolio
The FXTM MetaTrader does offer a lower range of currency pairs and asset classes in comparison to other forex trading platforms. There are just 33 currency pairs, and two CFD spot metals (XAGUSD and XAUUSD). The cTrader platform offers 4 asset classes, including 70 currency pairs, 7 pairs of metal trading, and stock indices.
On the positive end, forex traders in South Africa will gain access to a leverage of 1,000:1, and trade sizes from $0.1. Its technology also offers fast execution speeds of 52 milliseconds.
Different FXTM accounts charge different fees. The ECN account charges low spreads but there is a commission. The commission fee charged by FXTM will reduce if you have a higher account balance or are an active trader.
The broker does charge higher non-trading fees—a fee of $5 per month will be charged if you fail to place any trades after six months. There is a withdrawal fee of $3.
Accounts can be opened quickly and simply, and should be ready within two business days. The minimum deposit required for this broker varies on the account type. The ECN account has a $500 minimum requirement, while the standard account has only a $100 minimum requirement.
FXTM offers support through phone, email, and live chat, in a wide range of languages including English, French, German, Chinese, Italian, Czech, Arabix, Polish, Russian, and more.
5. AvaTrade: Best for FX Innovation
AvaTrade was founded in 2006 and is based in Ireland. It is a CFD broker offering traders low spreads, and gives access to over 785 financial instruments. Impressively, it is regulated across five continents, including Africa.
- Low trading fees
- Multiple and free deposit and withdrawal options
- Quick and simple account opening process
- Quality educational tools
- Limited research tools
- Inactivity fee
- Poor phone support
In total, traders in South Africa can utilize 55+ major, minor and exotic pairs. Competitive spreads offered started from 085 pips on the USD/ZAR, and 0.9 pips on EUR/USD.
AvaTrade charges competitive fixed spreads over a wide variety of financial instruments. The EUR/USD margin 30:1 and the spread is 0.9 pips.
It offers standard trading and non-trading fees. There is no withdrawal fee but there is a high inactivity fee of $50 after three months of no account activity, and an administration fee of $100 is charged after one year of inactivity.
Avatrade offers no guaranteed stop losses or volume discounts. And to open an account? There is a minimum deposit requirement of just $100.
Furthermore, a minimum amount of $100 can be deposited, and a trader can withdraw 200% of the amount deposited via a credit or debit card. An AvaTrade account can be opened pretty speedily, and the responsive customer support team provides support over chat, email, and phone, in several languages.
6. Plus500: One of the Best for CFD Experienced Traders
Plus500 was established in 2008 and is a CFD broker with over 320,000 active clients. It offers CFD trading on forex, cryptocurrencies commodities, and indices.
- Low trading fees
- Low minimum deposit
- Easy to use proprietary platform
- Multiple trading instruments
- No South African phone support
- Limited educational material
Investor Warning: 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Plus500 offers a wide range of CFD markets including over 60 forex pairs, more than 67 indices, 17 commodities, 10 cryptocurrencies, shares, options, and ETFs. Plus500 charges no commission fees, but because of this, it cannot offer low spreads. Be aware that the spreads are variable and constantly adjusted according to the market spread, depending on the trading instrument.
On the flip side, Plus500 offers low trading fees, and it does not charge any deposit or withdrawal fees. Is there a charge for becoming inactive? Yes. There is an inactivity fee of $10 per month charged, after three months, for not logging into your account.
Additional fees may apply based on your trading activity. Plus500 will charge a currency conversion fee of up to 0.7% of the trade’s realized net profit and loss, also a guaranteed stop order fee, and an overnight funding fee when you’re holding a position after a certain time.
⚡️ Be aware: On the downside, Plus500 does not offer a desktop trading platform. The broker offers a WebTrader and mobile trading platform only.
When signing up to Plus500, you will need to make an initial minimum deposit of $100. The customer support offered by Plus500 is helpful and very responsive, and can be accessed through WhatsApp, live chat, or email.
Overall, Plus500 is one of the top forex trading platforms due to its CFD offering. South African traders who prefer to trade CFDs, and can manage risk.
How to Trade Forex in South Africa 📈
Now that we have highlighted our top forex brokers in South Africa, we’ll go over several key aspects of forex trading to help you succeed in the world of trading. Including key forex trading strategies and the tax implications.
Best Forex Trading Strategies in South Africa
When it comes to forex trading, going in without a strategy is just asking for failure. The more you prepare, and the more forex strategies you understand, the more likely you are to succeed. Why not get off to the best start? Here are some of the best strategies to trade forex in South Africa.
Price Action ✅
If you are an analyzer, price action strategy might be just what works for you. Try to predict the next move, hit at the optimal time, and profit quickly. A trader using a price action strategy is focused on the patterns of movement with a currency pair.
In this case, long-term trends and large macroeconomic conditions aren’t so important because these are short term trades—sometimes just a few seconds (or less).
Day Trading ✅
Day traders use a strategy similar to price action that closes all trades by the close of the session. When a time limit is placed on the trade, investors are protected from bigger overnight fluctuations. Although the forex market is open 24 hours a day, weekend moves are sometimes surprising.
Day traders implement a lot of the same techniques as price action traders. Day trading usually involves a higher number of trades than trend trading or range trading, which we will get to soon.
Range Trading ✅
When range trading, a trade may be held for a few short minutes, a couple hours, or even days—the timing is not as specific as day trading. Range trading aims to take advantage of bigger patterns based on resistance levels and support.
Range traders look at currency pairs that are moving in no specific direction—it is moving within a predictable range. To succeed, traders buy at the low points of the range and sell when it hits the higher point.
Trend Trading ✅
Trend trading and range trading both follow similar time frames. The biggest difference is how the currency pair moves—it has a specific direction, as opposed to a range of movement.
A trader that has mastered this strategy will identify the trend and place trades accordingly. Small pullbacks will usually be ignored in favor of waiting for the potential for bigger profits.
How to Conquer Forex Trading in South Africa
There are numerous ways to succeed in the forex market aside from the basic buy low, sell high mantra. The more you understand, the more you will be able to recognize and capitalize on profitable opportunities.
- Carry trading: You can profit on the directional movement of a currency pair, but additionally, you can move on the interbank interest rate of a currency. When you hold a currency pair, it is the same as holding it in a bank. You will earn interest on it. Carat traders try to profit from the difference in interest rates on these currency pairs.
- Binary options: Binary option trades partake in all or nothing options, rather than taking a profit or loss based on the movement of a currency pair. If the currency is at the price you predicted on a set date, you make a profit. And vice-versa, if it is lower than the price predicted, you lose money.
- Shorting: If you think a currency is currently overvalued, and likely to fall in the future, the top short selling brokers will lend you the currency so you can sell it when the price falls.
Forex Terminology in South Africa 📚
To ensure that you execute your trades properly, you will need to know some basic forex trading terms. Here are some of the key terms:
- Pip: This is the smallest unit of measurement in the forex market $0.0001—also referred to as the basis point.
- Lot size: This refers to the size of your order. A typical lot size is 100,000 units of currency. Note: There are smaller lot sizes called microlots.
- Orders: This works just the same as you would order food at a restaurant. You place your order into the forex platform, and it delivers.
- Calls: These are contracts based on a currency pair. The contract gives you the right, but not the obligation, to buy an underlying currency at a certain price on a certain date in the future.
Forex Trading Example in South Africa
Even with the terms mentioned above, you might be finding it difficult to visualize what a forex trade actually looks like. Below, we take you through what a forex trade in South Africa would look like in practice so you can hit the ground running.
Let’s assume that ZAR/USD is trading at 0.05780/0.05790, and you predict a rise in price. The margin is 3.17% and you want to buy R150,000.
You will only need $275.08 in your account—luckily, the broker will lend you the rest. The ZAR/USD price moves as expected, and within 3 hours you borrow the remaining amount needed. This is a move of 23 points (0.06020/0.05790), and you make a profit of $345.
💡 Confused about the 24/5 forex market? Learn about the crucial timing of forex trades.
How Forex Trading Works in South Africa
If you are considering trading in South Africa, there are some specific forex regulations to understand as set out by the FSCA that you must adhere to. While these guidelines are outlined in full on the FSCA website, here are some key points:
1. The FSCA has stated that it is illegal to buy forex from firms without the proper authorization, and it is also illegal to speculate against the rand. To help you recognize a forex broker scam, keep in mind: the broker should be regulated, have a sufficient customer support team, and should never pressure you into handing over money.
2. To fund an account with R1 million or more, a Tax Clearance Certificate must be first acquired.
3. To transfer R10 million or more offshore, an application to the financial surveillance department must be first submitted.
⚠️ Forex scams are real: The FSCA has issued multiple warnings about fraudulent forex brokers or scammers. The use of social media has made it harder for victims to discern a legitimate broker from a fraudulent one. Tellingly, a report found that 50% of forex scams find their victims via social media.
How is Forex Regulated in South Africa? 🏛
In South Africa, forex brokers are regulated by the FSCA. Forex is legal so long as it is speculation on forex derivatives through a licensed broker, and it does not contravene international money laundering laws put in place by the South African Reserve Bank. This entity oversees any and all outgoing cash-flow from the country. Traders must declare profits to the South African Revenue Service (SARS).
How Much Money Do I Need to Start Trading Forex in South Africa?
The best way to become successful at forex trading involves the use of a forex broker, which makes things quicker, more cost-effective, and more streamlined as opposed to going through a traditional bank.
In most cases, forex brokers require a minimum deposit to open an account, the size of the deposit will depend on the forex broker, and typically depends on the services and tools offered.
While some forex brokers have a $0 account minimum requirement, most brokers do require one before you can start trading. Generally, minimum deposits start at $100 and can go up to $10,000.
How Much Do Forex Traders Make in South Africa?
At this stage, you’re probably wondering exactly how much a forex trader in South Africa makes, right? Well, forex traders in mid-career with in or around five to nine years of experience make an average annual salary of R300,000 (about $18,462.612 USD).
Realistically, the answer to this depends on how much risk is involved in your strategy.
Is Forex Taxable in South Africa? 💸
Yes, forex is taxed in South Africa. Even if you have earned money through an offshore account, you must declare your income tax to SARS.
South Africa’s Tax System
South Africa operates a tax system based on residence. In other words, residents are taxed on their worldwide income no matter where it was earned. Of course, some exceptions do apply. This means that wherever a South African citizen’s income is earned, the tax must be paid at the place of residence while the income is generated.
Declaring Profits 💰
Forex traders residing in South Africa must declare profits earned from forex on their tax forms. All expenses incurred from trading should be deducted before calculating the total taxable profit.
As such, traders ought to meticulously record and document everything related to their trading.
Another thing to note is that profits must be declared in the South African currency, the rand. Failure to declare profits will have penalties just like failure to report income in any other jurisdiction.
Who is the Best Forex Trader in South Africa?
Though there are many successful women in forex trading, the best trader in South Africa is notably Sandile Shezi. Below we will take you through his story, and how he became one of the world’s youngest millionaires.
Shezi took a step that a lot of people would consider risky at his age. He took his university tuition fees, and decided to put it into forex trading. At just 23 years old, Shezi had accrued so much that he was entered into South African’s book as one of the youngest millionaires in history.
Today, Shezi owns a famous trading company in South Africa. With this, he aims to educate more people on forex trading. According to him, it is an accessible market for those with a less privileged background and he is happy he had the opportunity to become financially stable at such a young age.
Has South Africa Been Impacted by COVID-19? 🦠
Though the South African economy has suffered the worst quarterly slide in decades, it had already been giving a dismal performance before COVID-19 hit.
Over the past twenty years, various administrations have tried narrowing the gap between the rich and the poor. These goals focused on stimulating quick growth in the economy.
While there has been progress made on redistributing income, the economic results have been less than stellar. The National Development Plan, which aimed to move the nation to a yearly economic growth rate of 5% has not come into effect yet. In fact, the last ten years have seen a growth of just 2% per year.
Even before the onset of COVID-19, Q1 2020 saw the economy in the second consecutive quarter without growth. The situation hasn’t gotten much better in the meantime. Q2 2020 saw GDP shrink by 16.4%, for a total economic reduction of 51%.
The implications are clear: When an economy isn’t expanding, it cannot produce enough employment to satisfy the influx of younger generations into the market. As a result, the unemployment rate has seen a rise.
The economy’s woes have been intensified by the healthcare issues resulting from the pandemic. Though South Africa may have achieved herd immunity from the virus, a revival of the economy by means that will benefit all sectors is necessary. Some suggest that the only way to do this is via a shared growth strategy, which looks to provide a solution to the myriad of economic challenges faced by the country.