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Forex trading has become really popular among retail traders in South Africa and numerous well-known and reputable forex brokers are open to South African-based traders. Below, we will take a look at a few things that are important to keep in mind when trying to select which broker is best for you, your preferences and your trading strategy.
Many South African retail forex traders specializes in trading the ZAR, but you can go with any currency pair or pairs your want. A good thing to know about the ZAR (South African Rand) is that currency pairs that include the ZAR are considered exotics on the forex market. Of course, the South African Rand is well-known currency, but is not as frequently traded as the majors or the minors, and South Africa is considered an emerging market. This in turn means less market liquidity and you can expect wider spreads and generally higher costs associated with the trading. Still, many forex traders love trading the ZAR since the lower liquidity also tends to come with higher volatility – and they have learned how to profit from that.
Regulation
In South Africa, the Financial Sector Conduct Authority (FSCA) regulate the financial sector, including forex brokers. The FSCA was established in 2018 as the successor to South Africa´s Financial Services Board (FSB).
FSCA licensing is not mandatory for forex brokers that accepts South African retail clients, but many traders in South Africa prefer to pick a broker that holds an FSCA license. The FSCA licensed forex brokers must adhere to an additional set of rules aimed to protect the clients. Among other things, they must keep client capital segregated from operational capital in a way that safeguards the clients. Without such segregation, client risks losing their money if the broker company becomes insolvent.
To be licensed by the FSCA, the forex broker must maintain an office within South Africa. Many of the popular international brokers on the South African market that holds an FSCA license are not headquartered in South Africa, but operate through a South African subsidiary and that subsidiary maintains an office within the country. Through their various subsidiaries around the world, big international broker companies can adapt to comply with national law in each jurisdiction.
Forex brokers regulated elsewhere
There are international brokers that accept South African traders even though the broker does not have an office in South Africa or hold a license from the FSCA. This can still be a suitable choice for a South African trader if the broker is regulated and approved by another reputable authority. It is for instance not unusual for traders in South Africa to use an online broker based in the United Kingdom and regulated by UK´s Financial Conduct Authority (FCA) or a broker that is based in Australia and regulated by the Australian Securities & Investments Commission (ASIC).
Does this broker fit your trading strategy?
It is not possible to say that one broker is superior to all the other brokers, since each broker comes with their own pros and cons. It is therefore important that you take your own trading strategy and your own preferences into account when you select a broker.
Here are just a few questions to keep in mind when comparing different brokers:
- Is this forex broker offering the currency pairs and financial forex products that I need for my trading strategy? It doesn´t matter much how great a broker is if it does not offer the type of forex trading that you plan on doing. Today, there are many high-quality brokers available to South African traders that offer an extensive range of major, minor and exotic currency pairs, so there is no need to settle with one that isn´t providing what you want in this field.
- What would it cost me to use this broker for my trading strategy? It doesn´t matter much if a broker has super tight spreads for USD/EUR trading or no commission on EUR/GBP if those are not the pairs you want to trade. Remember to look at the whole situation. Some brokers will try to lure you in with offers of commission-free trading, while simultaneously charging unusually big commissions. Some have low commissions, but will charge exuberant fees for everything else, from deposits and withdrawals (transaction fees) to using the platform (platform fees) and not using the platform (inactivity fees).
Are you planning on keeping forex positions open from one trading day to the next? Pay special attention to the rollover costs and how they are calculated. - Is this South African forex broker suitable for my bankroll? Many beginner retail traders are micro traders who needs to select a broker that will allow small deposits and trading with small positions. Some brokers even offer special micro trading accounts that are designed especially for the needs of micro traders, e.g. where you are not slapped with a big fixed-size commission on tiny trades.
Trading platforms
Just as in other parts of the world, some brokers active in South Africa use their own proprietary platforms, while others go with independent third-party platforms such as MetaTrader 4 (MT4), MetaTrader 5 (MT5) and cTrader. There are also those who will give you access to more than one platform.
The best way to evaluate a platform is to open a free Demo Account with the broker. The Demo Account comes filled with free play-money so you can explore the platform by making trades, using the tools, and more – without risking any real money or even making a first deposit. This will give you a feel for the interface and how things work. Serious brokers are typically more than happy to let you open a free Demo Account, because they have faith in what they have to offer and doesn´t need you to “buy a pig in a poke”.
Here are a few examples of issues to keep in mind when evaluation a platform.
Access
How can you access the platform, and what do you prefer? Common choices include:
- Download and install the platform on your desktop computer. (Many downloadable platforms are only compatible with Windows, and your computer must also fulfil certain minimum requirements to run the platform.)
- Access and trade directly in the browser window.
- Download and install a mobile app on your smartphone or tablet. Larger brokers typically have apps available for iOS and Android, and sometimes also Windows Mobile. Make sure you download the right app for your mobile device.
The interface
Do you like the interface? Is it quick and easy to use for you? With fast-paced forex trading, every second counts, and a clunky interface can hurt your bottom line.
If you plan on trading mostly on your phone, make sure you evaluate the interface on your phone, and vice versa. Some platforms look great on a large desktop computer screen, but are difficult to navigate on a small smartphone touch-screen, and so on.
Automated trading etc
Do you want to engage in any form of automated or semi-automated trading? What does this platform permit and provide when it comes to automated trading, built-in or bespoke trading robots, copy trading, signal-services, etcetera.
Level 2 data
Will the broker/platform provide you with Level 2 data?
Educational material
Does this platform only come with the standard educational material for forex trading, or does it also include educational material specifically for South African traders or forex traders focusing on trading the ZAR against other currencies? You may for instance wish to learn more about how to interpret announcements from the Reserve Bank of South Africa or how the ZAR tends to react to various events nationally and abroad.
Of course, this is also information that can be found elsewhere. It is up to you to decide if it is important to have it included in the platform or not.
Bonuses
Neither South African law nor the FSCA licensing regulation prohibit or limit bonuses and similar incentives and promotions offered to retail forex traders. Therefore, you might encounter big welcome bonus offers and other promotions on the South African market that would not be legal under a more strict authority, e.g. within the European Union.
As a trader, you need to be vigilant and carefully evaluate the offers – some are great, while others come with horrible strings attached. Be especially careful about huge turn-over stipulations that will freeze your entire account from withdrawals until you have fulfilled them. You can read more about trading bonuses in general – in South Africa and elsewhere – on are trading bonus page.
Leveraged forex trading in South Africa
Neither South African law nor the FSCA licensing requirement limit how much leverage a broker can offer a forex trader. Some brokers will offer up to 1:1000 in leverage or even more, but exactly how much leverage you will be extended for a particular transaction will depend on several factors, including which type of forex trading you are carrying out.
Negative balance protection
Important: Neither South African law nor the FSCA require forex brokers to offer negative balance protection for retail clients using leverage. Some forex brokers that accept South African traders offer this anyway, but you can´t take it for granted so this is a point that you need to check in advance. If you are planning on using leverage and negative protection balance is something that you want, make sure the broker you select is offering it and that it covers South African-based traders. Also make sure that you understand how it works, as it has its pros and cons.
Opening a trading account and going through the KYC check
If you go with an FSCA regulated broker, you can expect them to perform a Know Your Customer (KYC) check in order to comply with anti-money laundering (AML) requirements. This is also common practise for brokers regulated by other reputable authorities around the world, although the exact requirements can vary depending on the jurisdiction and licensing body.
As a part of the KYC check, you may for instance be asked to digitally submit a photo copy of your South African Smart ID Card to verify your identity and digital photo copies of utility bills in your name to verify your address.
In some cases, you are allowed to start making deposits and do real-money forex trades on the platform right away, but will be prohibited from making any withdrawals until the KYC check has been fully completed. Top forex brokers typically get the KYC check processed within a few working days.
Deposits and withdrawals
Transaction methods
If you are based in South Africa, it can be convenient to go with a broker that has a strong presence on the South African market and accepts common local transaction methods for both deposits and withdrawals. This can both help reduce transfer fees and cut down on transfer times and issues.
Minimum deposit
Many novice traders that are just starting out prefer to make a small first deposit and that can also be a wise decision if you are trying out a new broker that you don´t know much about. When comparing different brokers, it can therefore be a good idea to check their rules for minimum deposits. Today, there are quite a few brokers active in South Africa who will let you open an account with just 200 Rand, and some others don´t even have a lower limit. At the other hand of the spectrum, we find brokers who require a first deposit of at least 10,000 Rand to even consider you a client.
Tip! Some brokers offer several account types, and the minimum deposit requirement vary depending on which account type you chose.
Deposit and withdrawal fees
Before you pick a broker, make sure you know if the broker charges any deposit and/or withdrawal fees and how they are calculated. Some will for instance limit the number of fee-free withdrawals you can do in a month.
Even small fees can erode your bankroll, and every cent spent on fees is a cent that could have been invested and earned a return instead.
Account currency
If you are based in South Africa and will make deposits and withdrawals in South African Rand (ZAR), it can make sense to go with a broker that will allow you to have ZAR as your account currency. Otherwise, you can end up wasting money on transferring ZAR into the account currency (e.g. $/€/£ ) and back.
ZAR account holders tend to be less effected by exchange rate risk associated with other major currencies and this can translate into lower risk per pip.
Brokers that offer ZAR accounts normally keep ZAR client funds in major South African banks, which can translate into quicker and less cumbersome transactions for local traders. In general, ZAR accounts also tend to come with lower minimal deposit requirements, but this is just a general tendency – you need to check the brokers you are interested in to find out their specific rules. Also, there are quite a lot of brokers available today that permit small first deposits in $/€/£ too.
Customer support
A few questions to keep in mind when evaluating the customer support:
- Is support available through my favourite method? The most common channels are phone support, email support and live chat support.
- Is the support staffed during my typical trading hours? Some issues need to be resolved urgently.
- If I want phone support, can I make a local call or do I have to make a potentially expensive call to another country? (This is only an issue for traders who prefer phone support. Today, many use the live chat support instead for real-time support.)
This article was last updated on: May 14, 2024