Forex trading is the trade of one currency for another. When you exchange your Rand for Euros, Pounds or Dollars, for example, you are Forex trading. Doing this to make money involves predicting which currencies are going to strengthen or weaken against others, and buying and selling to make a profit on the trade. The Forex (FX) market is the world’s largest financial market, with an estimated five trillion USD per day traded.
Why South Africa?
Chances are you can find a short course on Forex trading within driving distance for around R25,000. Its popularity has soared of late due to a few success stories (you can read more about these below) and the fact that it is still a largely unregulated way of brokering, meaning that a large amount of companies have set themselves up as brokers in South Africa. This means that there is no cap on potential profits, and it is attractive to those who like to take risks. For the average South African, the idea of a flexible, self-employed lifestyle with the potential for big rewards is clearly proving an idea worth exploring. The Rand is not a particularly valuable currency, but it is a stable one, making it a good starting point for trading.
What are the Pros and Cons?
As the Forex market is open 24 hours per day, it is completely flexible, although the most popular times for trade still centre around GMT and EST. South Africa is perfectly positioned in the middle of these two time zones for day trade. The other advantage is that you can invest with a 50-1 leverage, rather than the 2-1 offered on the stock market. This makes the potential for profit much higher.
On the other hand, it is a volatile and unpredictable market when compared with the stock market, where you have to rely on graph trends. The current popularity of Forex trading in South Africa means that there are a lot of self-proclaimed experts who will give you bad advice, and the lack of regulation means that they are free to do so.
Rules and Regulations
If your money is in a South African trading account and will be staying in South Africa, then a domestic trading account is easy to get, with little regulation. However, if you are opening up an offshore trading account, then your limit is R4,000,000. The Financial Services Board (FSB) of South Africa are responsible for monitoring brokers, but haven’t been particularly effective in doing so thus far. If you suspect a broker of fraudulent behaviour though, the FSB have a complaints line by which you can report them.
The South African success stories flaunt their lifestyles – and their young ages – all over social media. Sandile Shezi was a self-made millionaire at the age of 23, and trained himself on how to trade on the Forex market, while SimzD’Mandla was only 20 when he made his first million from Forex trading.
The Importance of Training
Before you let loose on the market, it is a good idea to get a bit of training; we can’t all be Sandile Shezi. Learn the terminology, get a mentor to run your ideas first and find out a bit of knowledge on patterns and predictions before you put down your first few thousand rand. Even more importantly though, at the beginning, is to make sure that your trainer is reputable and has some kind of certification, so that you aren’t losing money before you’ve even started trading!