What is Forex?
[top_three_brokers] You've probably heard the term forex but have no clue what it's all about.…
Forex trading South Africa is becoming immensely popular amongst currency traders! South Africans are seeking reliable Forex brokers.
Opting to trade with the best Forex brokers based on transparent, non-bias broker reviews are key to your long-term trading success.
We only review the top Forex brokers to ensure South African traders a safe and secure experience.
Our reviewing process consists of strict criteria that help beginners identify their regulated broker of choice. Becoming a profitable Forex trader does not come down to luck.
Enhance your knowledge with our wide range of education, guides, tips and how-to articles designed for traders – by successful traders.
Forex trading in South Africa requires you to do your research to give you the best odds of being profitable. Take the first step to maximise your returns!
Our Forex Trading SA review site is a good place to start your Forex trading broker review process. Browse the top brokers below – honest, transparent and comprehensive reviews.
FCA, FSCA, ASIC, SCB
Enjoy our latest up to date January 2022 Top Forex Trading Brokers in South Africa, tested on TradeFX. All brokers regulated, most even multi-regulated entities. This ensures client funds’ security and peace of mind!
Whether you trade, CFDs on Indices, Equities, Commodities or Forex, we want to provide you with a broker that you can have a profitable and safe trading experience.
Forex Trading South Africa can be a profitable journey and an opportunistic opportunity when trading with a regulated broker, with a local presence.
TradeFX South Africa was designed for traders – by successful traders! We have taken into account all the factors and emotions that beginner traders encounter.
Our goal is to answer these questions and help you make an educated decision when selecting your Forex broker of choice.
Do not try and go after no deposit bonuses, high leverage or unrealistic welcome bonuses! Low spreads, good support, low spreads, regulation and a fair trading environment should be your motivating factors.
Do not follow the 95% of losing traders, be the 5% that succeed!
Education is key, there is no magic formula, EA, Roboto or signal service. If I was good at trading, had a successful EA, why would I sell my service or product? I would sit back and rake in the profits. Give it some thought and it will all make sense.
You asked and we answered. We have researched the most commonly asked questions, concerns and trust factors traders required to make an educated decision when choosing Forex brokers in South Africa.
We review and rate every broker using the following criteria:
Regulatory entities have been shown to be one of the deciding factors when choosing a broker. We have put this as the focal point of our reviews along with other trust factors.
The FSCA is the entity that oversees financial services within SA. They have proven to be ethical and protect clients, taking action when needed against fraudulent companies.
Other than the FSCA there are 3 common regulatory bodies to consider; FCA (United Kingdom), ASIC (Australia), CySEC (Cyprus).
The latter has come under some scrutiny in the past.
A big deciding factor for most traders is the method of operation, although there might be more emphasis placed on this than needed.
Brokers can be put into 3 main categories; ECN (Electronic Communication Network), STP (Straight Through Processing), MM (Market Maker) – Each has its pros and cons whilst all 3 can still provide fair trading conditions.
Most brokers will not openly admit that they are Market Makers. Each broker will also be given a beginner rating.
Client support greatly affects the overall experience traders have with their brokers. It is important that support is offered via different channels on and off the website.
Since traders and brokers might be in different time zones, around the clock support while markets are open remains key.
In our researched opinion, this is a make-or-break factor. While deposits are mostly instant, withdrawals should be processed swiftly as well. Methods of deposit and withdrawals should be broad.
Debit/Credit card and bank transfer is the norm. Additional options are well rewarded. Be sure to always negotiate the best foreign exchange rates for bank transfers with your bank, before sending, or receiving funds from abroad.
The leverage, spreads, assets and account types are reviewed under this category. These are important factors that have a direct effect on profit/loss. This is considered the bread and butter of any trader’s account.
Different brokers offer different trading platforms. It is uncommon to see a broker not offering the industry standard MetaTrader 4 (MT4). Other popular platforms are MetaTrader 5 (MT5), cTrader and broker designed proprietary platforms.
Traders that are happy with their broker often decide to promote or recommend them to their friends or family. We will highlight their offerings, tools and overall assistance to make the journey smooth. A broker that offers a refer a friend program, will be well noted.
A wrap-up and our honest consultation based on the review criteria. A transparent broker review for you to make an educated decision on your broker of choice.
We provide traders with a user-friendly way to navigate and filter between brokers. View what is important to you at a glance. Reviews that are informative, exciting to read and easy to learn and understand.
By choosing a reputable broker combined with adequate education, these risks can be minimised. It is worth mentioning that screen time (time spent trading and analysing charts) plays a major role in this.
The lack of the former mentioned is directly contributed to why the majority of traders lose money in the long term.
Avoiding the following can dramatically put the odds in your favour:
We have spent weeks putting together all the knowledge we have gathered, with over 30 years of trading experience. Expand your knowledge by visiting our educational articles.
We want you to feel absolutely confident before investing your hard-earned money. Let your winners run and cut your losses short. Forex trading in South Africa can be profitable.
Forex trading, in general, can be intimidating to beginners. The general terms and understanding need to be researched before traders can feel comfortable trading in the financial markets.
We break down the most commonly asked questions to assist you in your trading.
The concept behind Forex trading is fairly simple to understand. In a nutshell, you buy or sell a selected currency pair with the speculation that you can either buy it back for cheaper or sell it for a profit.
Currency pairs are categorised as majors (EURUSD, USDJPY), minors (EURAUD, GBPJPY), exotics (USDZAR, USDNOK) – It is worth noting that minors and exotics normally have higher spreads due to lack of liquidity.
Read our in-depth article on how does Forex trading work to get a better understanding.
Do not use demo accounts to determine if you are profitable and ready to execute your live trading strategy. An EA or automated robot taking all human emotions and decision making can be an exception.
A Forex trading demo account should only be used to learn the ins and outs of the trading platform. This includes proper trade entry and exiting procedures.
A pip is a widely used term in the Forex trading industry and something you will need to understand to calculate risk and reward in currency terms.
A pip is the 4th digit after the decimal in a price quote, $0.0001 for USD related pairs. In simple terms 1/100th of 1% or 1 basis point. However, this is not the same for JPY related crosses, where a pip is the second digit after the decimal place.
Pips can also be broken down into fractions, which are called pipettes. Read our full article on what is a Pip and how much are they worth.
This can make or break a traders’ account. Even with the best trading strategy, you can still be looking at a declining account balance if your risk management (risk to reward ratio) is not properly managed.
No trader can expect to be right all, or even most of the time. This is where the risk to reward ratio comes into play. Some brokers offer exclusive risk management software.
MT4 (MetaTrader 4) is the world’s most popular trading platform, mainly designed for Forex Trading. It provides huge flexibility and is EA, Robot and custom Indicator friendly.
Although MetaQuotes launched MT5, the adoption has not gone as planned and is not as popular as everyone expected.
Not having a trading strategy is comparable to driving a car for the first time. You are not too sure what you are doing, what to expect or confident. We refer to it as going in blind.
Every consistently profitable trader in history followed a well-developed strategy and you should be no different.
Research, screen time and testing on a live account, with minimal acceptable risk, is the only way to get from point A to point B under true market conditions.
A stop loss is your best friend. As the word implies it stops or limits your losses.
A take profit locks in profits on a given trade, partially or in full. Both these are pending orders that need to be triggered by market price, either the bid or ask. This is dependent on your trade direction, buy or sell.
Always use a stop loss and take profit!
To keep things interesting and fresh we have added a Traders Blog.
Our Traders Blog is a fun, informative and exciting section with topics you asked for! We say it as it is. The Good and the Bad – The Truth! Come back for weekly posts. Are you ready to start Forex trading?
Follow these steps on how to start Forex trading. An easy to follow step-by-step guide to get you started!
The Commodity Channel Index (CCI) is a technical indicator that compares the current price level to the average price level over a specified time period.
Donald Lambert developed it with the aim of detecting cyclical changes in commodities.
The CCI is classified as a momentum oscillator, which means it is used to detect overbought and oversold conditions.
The CCI indicator is based on the fundamental assumption that commodities travel in cycles, with highs and lows occurring at regular intervals.
Signals can also be produced by trend line breaks. Connecting the peaks and troughs can be done with trend lines.
Like most technical indicators, the CCI should be used in combination with other types of technical analysis.
cTrader is a user-friendly trading platform with advanced trading features such as quick entry and execution and coding customization.
cTrader, developed by Spotware to balance basic and complex features, can be used by both novice and experienced traders.
This trading platform provides direct access to the interbank market and other features such as algorithmic-based trading systems, various pre-sets, and detachable charts.
Improved charting capabilities and order management systems allow more efficient management of your positions in volatile markets.
With advanced charting capabilities, cTrader gives clients an advantage in the competitive forex market.
The aim of cTrader is to be an “all-in-one trading platform” that gives traders all over the world access to the Forex market and serves as an alternative to the MetaTrader software.
Some of the features of cTrader include:
What distinguishes cTrader is its beginner-friendly interface and ease of use, but don’t let that deter you if you’re an experienced trader. Most experienced traders continue to use cTrader. Whatever trading platform you use is a matter of personal choice.
Double top and bottom patterns appear on a chart when the price shifts in a pattern similar to the letters “W” (double bottom) or “M” (double top)
The double top is a reversal pattern that forms after a prolonged uptrend.
The “tops” are peaks created when the price reaches a certain amount that cannot be broken.
After reaching this level, the price will briefly bounce off before returning to test it again.
If the price bounces off that level again, you’ve got a double top! It resembles the letter M, and illustrates a bearish trend.
Remember that double tops are a trend reversal formation, so look for them after a solid uptrend.
The double bottom is a trend reversal formation, too though this time we’re trying to go long rather than short.
These formations occur after two valleys or “bottoms” have formed during an extended downtrend. It looks like the letter W, and signals a bullish price movement.
Remember that double bottoms, like double tops, are trend reversal formations.
You should look for these after a significant downtrend.
Since rounding patterns, in general, can easily lead to fakeouts or mistaking reversal trends, they are often used in combination with other indicators.
In technical analysis, a fakeout is a situation in which a trader enters a position anticipating a potential transaction signal or price change, but the signal or movement never emerges, and the asset moves in the opposite direction.
Fakeouts are also known as false breakouts.
You will sell a breakout if you assume that a breakout from a support or resistance level is incorrect and that the price will not continue to move in the same direction.
Trading false breakouts could be smarter than trading the breakout in cases where the support or resistance level is high.
You may stop being whipsawed by learning how to trade fake breakouts.
Most forex traders like trading false breakouts. Why is this so?
Price floors and ceilings are expected to be represented by support and resistance levels. If these levels are breached, the price is expected to proceed in the same direction as the breakage.
When a support level is broken, it indicates that the overall market trend is downward and that people are more likely to sell than purchase.
Remember that trading false breakouts are an excellent short-term strategy. Breakouts usually fail on the first few attempts but may succeed later on.
A forex gap is a section of a chart in which the price of a currency pair fluctuates sharply up or down with little or no trading in between.
As a consequence, there is a gap in the usual price trend on the bar or candlestick chart.
Gaps arise suddenly when the perceived exchange rate between two currencies shifts due to underlying fundamental or technical factors.
Gaps do happen in the forex market, but they are much less prevalent than in other markets, thanks to the fact that currencies are exchanged 24 hours a day, five days a week.
However, gapping may occur when unexpected economic data is published or when trading begins after a weekend or holiday.
While the forex market is closed to speculative trading over the weekend, it remains available to central banks and other financial institutions.
As a result, the opening price on a Monday morning could vary from the closing price on the previous Friday, resulting in a price difference.
The open price on Monday differs from the closing price on Friday. This difference is the gap.
Before we move into the specifics of the Aussie-gold relationship, it’s worth noting that the US dollar and gold don’t exactly fit. Typically, as the dollar rises, gold falls, and vice versa.
The key logic here is that during times of economic turmoil, investors prefer to dump the USD in favor of gold, which is regarded as a safe haven.
Many factors influence currency prices, including supply and demand, politics, interest rates, speculation, and economic development.
More precisely, since economic development and exports are directly linked to a country’s domestic industry, some currencies are naturally highly correlated with commodity prices.
Australia is currently the world’s second-largest gold producer after China, exporting approximately $5 billion worth of yellow metal per year!
Gold has a positive correlation with the Aussie, also known as the AUD/USD.
As gold rises, so does the AUD/USD. When gold falls, so does the AUD/USD.
Historically, the AUD/USD has had an 80% correlation to the price of gold!
Since the markets are so interconnected, there is a connection between various asset groups. This correlation is not absolute, but as gold prices rise, the AUD/USD will change to the upside as well as the downside.
Oil is a commodity on which the global economy runs.
Canada, one of the world’s leading oil producers, exports over 3 million barrels of oil and petroleum products to the United States every day.
As a result, it is the biggest supplier of oil to the United States!
This means that Canada is the primary supplier of black products in the United States!
Because of the volume involved, there is a high demand for Canadian dollars.
Also, keep in mind that the Canadian economy is heavily reliant on exports, with about 85 percent of its exports going to its neighbor down south, the United States.
As a result, how US consumers respond to changes in oil prices can have a significant impact on USD/CAD.
If demand in the United States increases, producers may need to order more oil to keep up. This can cause oil prices to increase, causing the USD/CAD to fall.
If demand in the United States falls, manufacturers will decide to take a break because they do not need to produce more products. Oil demand could decline, putting pressure on the CAD.
Historically, oil has had a 93 percent negative correlation with USD/CAD.
As oil prices rise, the USD/CAD falls. As oil prices fall, the USD/CAD rises.
MetaTrader 5 (MT5) is a MetaQuotes multi-asset trading platform that allows you to trade forex, commodities, and futures.
MT5 allows traders to display charts, stream live markets, and position orders with their broker, just like most other online trading platforms.
MT5 trading allows traders to enter financial markets such as foreign exchange, currencies, CFDs, stocks, futures, and indices.
Fundamental and technical analysis methods, copy trading, and automated trading are among its many features.
The ability to use trading robots, known as Expert Advisors or EAs, is the most popular feature of MT5.
The robots work independently of the trader, analyzing prices and carrying out trading operations in accordance with an underlying algorithm.
Other features of MT5 include:
Traders can also connect with other traders through the embedded MQL5 group chat to network and exchange tips and strategies.
The pivot point is a technical analysis indicator used to evaluate the market’s overall trend over various time frames. The pivot point is essentially the average of the intraday high and low, as well as the previous trading day’s closing price.
Trading above the pivot point signifies ongoing bullish sentiment, while trading below the pivot point indicates a bearish sentiment.
The pivot point serves as the indicator’s foundation, but it also provides estimated support and resistance levels depending on the pivot point calculation.
As a result, the easiest way to use pivot point levels in forex trading is to approach them similarly to standard support and resistance levels.
The price will evaluate the amounts repeatedly, much like good old support and resistance.
The more times a currency pair reaches a pivot level before reversing, the more powerful the level becomes.
In fact, “pivoting” simply means achieving a degree of support or resistance and then reversing.
If you notice that a pivot level is holding, you can have some strong trading opportunities.
Traders also combine pivot points with other trend indicators. A pivot point that overlaps or converges with a 50-period or 200-period moving average (MA) or Fibonacci extension level becomes a more powerful support/resistance level.
Scalping is similar to those action-packed mystery movies that keep you on the edge of your seat. It’s fast-paced, thrilling, and mind-bending all at the same time.
Scalp trading, also known as scalping, is a common trading strategy distinguished by relatively short time periods between trade entry and exit.
These types of trades are kept for just a few seconds to a few minutes at most!
The primary goal of forex scalpers is to capture very small quantities of pips as many times as possible during the busiest times of the day.
The idea behind scalping is that a series of small wins will quickly add up to large profits.
Its name derives from the style in which its goals are accomplished. A trader is simply attempting to scalp a large number of small gains from several trades during the day.
Scalpers can place hundreds of trades in a single day, looking for small profits.
At the end of each trading day, all positions are closed.
Since scalpers must essentially be glued to the charts, it is suited for those who can devote several hours to their trading.
To be competitive, you must have intense concentration and fast thinking. Such quick and demanding trading is not for everyone.
Fibonacci retracement levels are horizontal lines that represent potential support and resistance levels where price may reverse direction.
These levels are based on Fibonacci levels, hence the name. Each of these levels is associated with a percentage. This is particularly useful because it gives an accurate analysis of the high and low prices in the market.
The indicator then creates levels between the two points.
Hypothetically, if a stock is $10 but falls to $2, it will fall down a certain percentage. That percentage will be considered a Fibonacci number.
These numbers can be found anywhere, so traders believe that these numbers may also be relevant in the trading market.
It is quite a simple method to calculate these levels because there is no real work involved.
Fibonacci retracement levels are simply the range between the numbers that are chosen. But the origin of these numbers is a fascinating one. This phenomenon is called the Golden Ratio.
These levels are derived from a specific number string, and you can find all the possible numbers in that exact string.
Fib levels look like a pretty exciting and fun take on the forex trading world.
In forex trading, support levels are an integral part of your overall strategy.
When the price begins to rise, the lowest position reached before its rise serves as a support level.
A support level is created when buyers enter the market whenever the forex pair falls below the market price. That is when the buyers decide to chime in. On the other hand, sellers leave their positions when the price drops below the support level.
In layman terms, you buy when the price falls below the support level.
It is a widespread practice in the world of forex and stocks.
If the price of a currency pair falls in the line of the support level, it will stick around and keep things peaceful, or it will go even a lower level, and the forex market would have to incorporate and include those changes into the trade.
To use support levels, you will have to pay close attention to the overall price movement. A currency pair’s and rise and fall at any given moment, and it is entirely unpredictable.
Once you learn how to keep track, it will be easier for you to establish the support levels.
A price level of resistance is a price level at which rising prices come to a halt, change direction, and begin to drop. Resistance is frequently perceived as a “ceiling” that prevents prices from growing further.
The idea behind the resistance level is many people are willing to sell the same trade at competitive prices in trading terms, making the proposals more challenging.
Like many other things in the forex trading world, resistance towards an asset is also unpredictable. It can either rise and prove beneficial, but the situation can also change completely if new information comes forward.
On the other hand, if the resistance level manages to sustain, it can have a long-lasting effect. Resistance is said to the opposite of support levels.
If you are looking to do fair trading or stock analysis, you must keep resistance levels and support levels in mind because these are two key factors.
Technical traders keep both these factors in mind when they are doing any technical analysis as they must keep careful track of what prices are going up or what trends may be changing.
It is crucial to keep an eye on the pair’s prices at all times. If you see that a fee is on a constant level, that means that the pair has a fixed resistance, making the traders’ lives much more accessible and more straightforward.
An Exponential Moving Average can be defined as a moving average in which a greater weight and significance is put on the most recent data points.
It is also referred to as the exponentially weighted moving average. As compared to Simple Moving Average, exponentially weighted average reacts more significantly to price changes.
To calculate EMA, more observations are needed than SMA. For example, you plan to take 20 days for observation of EMA. For this purpose, you will have to for 20 days.
Then on your 21st day, you can utilize the EMA from the 20th day as the EMA for your first day.
The process of calculating EMA is simple.
It requires you to take the sum of the asset’s closing prices during a period and then divide them by the number of observations for that period.
For instance, if you take the EMA for 20 days, you have to take the whole sum of the closing price for 20 days and divide them by 20.
EMAs are utilized to confirm significant market moves and gauge their validity.
However, EMA’s dependency on historical data serves as a limitation as economists feel that markets are now efficient and can reflect the available information. Therefore based on the efficiency of markets, historical data is not needed.
An SMA (simple moving average) is a technical indicator that equals a price range, usually closing prices, divided by the number of periods.
It is often needed to show a security price trend. For instance, if the simple moving average is trending upwards, a rise in pricing is indicated similarly if it is pointing down, then it means the price is decreasing.
For calculation Simple Moving Average, one must divide the number of prices within a period by the total period. Let’s take an example shares of Tesla.
Suppose the shares close at $ 10, $11, $12, $11, and $ 14 for five days. Then the Simple Moving Average for the Tesla share would be $10 + $11 + $12 + $11 + $14 =58, divided by 5, i.e. 11.6
Simple Moving Average can be calculated for different periods, which makes it customizable.
SMA and EMA are different concerning the difference in sensitivity they show to any change in the required date. Where EMA assigns a higher weighting to recent prices, SMA assigns equal values to all weightings.
As SMA depends on historical data, economists and traders do not prefer it, as current markets are efficient enough to reflect the available information.
A forex demo account allows you to trade with virtual money. Think of it as a VR(virtual reality) where you can experience the trading world without losing real money.
Demo accounts are ideal for determining whether or not you are prepared to take on the forex market and all of the pitfalls that come with it; it is an excellent tool to have in your trader’s arsenal.
Many individuals do not consider this to be a vital step, but that is a mistake. Whether you’re new to forex trading or an old hand, a demo account may help you polish your talents by allowing you to fine-tune your trading tactics before putting them live.
Finally, demo accounts allow you to improve your trading skills. Furthermore, a demo account is an excellent tool for record-keeping because it allows you to mirror trades and preserve additional records of any changes you make.
Remember that you never truly know what the market will do—it just does what it does, and nothing is definite.
As a result, you must approach the sample account as realistically as possible, do not regard it as a game. If you behave riskily in your demo, there’s a good chance you’ll do the same in your real deals.
Let us take a look into what a Japanese candlestick is. When it comes to the Japanese, you really can expect anything. And one of these particular things that they decided to do was develop their version of a trading analysis to trade rice.
Of all the things in the world, they put their greatest minds together to create a strategy where their trade life could have become more accessible.
If that is not smart, we do not know what is. However, this candlestick technique was not precisely known to the Western world until a man named Steve Nison decided to bring some new knowledge to light with the traders of the Westside.
He had learned this technique from a Japanese broker, so he decided to put “his” knowledge to good use.
These candlesticks can be used for any time frame; there is no limit. It can be one day, one hour or even half an hour. Japanese candlesticks are used to describe the price in the given time frame.
The lines and the ranges shown on the chart are used to figure out the candlesticks. It all depends on the spaces being filled on the charts.
Forex no deposit bonuses are a marketing strategy used by brokers.
This enrols fresh customers; they’re a one-of-a-kind marketing strategy used by forex brokers to entice new traders to establish an account in order to enjoy trading with fiat currency instead of a practice account.
Brokers make these strategies to attract investors towards choose between broker A and B. the broker offering more incentives will attract more investors.
However, it may be an excellent place for beginner traders to begin their exploration of the forex market if it is used appropriately.
There are certain conditions in order to get a no deposit bonus; the trader must not be an old customer. To get the incentive, you must provide proof of your identity. To withdraw any winnings, trading restrictions are necessary.
New traders frequently make the mistake of believing they may collect their no deposit incentive right away, but this is not the case. A trader can only withdraw the profit earned while trading on the forex bonus currency; there are certain restrictions.
This includes a need to trade a particular number of units prior to making a withdrawal, which varies per broker.
While considering forex no deposit bonuses, choosing the correct broker is crucial. So choose the right broker so that could get un scammed incentives.
It always fascinates us as new customers whenever we go to a restaurant for the first time, and we are served with a free starter (on a certain amount order) until our order is served. A welcome bonus in forex is something alike.
A welcome bonus is a bonus that you get on your first deposited amount equal to 100 percent of your initial deposit but not more than $500.
The profits can also be withdrawn without restriction, and the incentive can be withdrawn after the specified market volatility has been met.
The benefits of the welcome bonus are as following:
To create competition and attract more investors towards the investment in forex and other financial markets, the brokers initiate and offer incentives like a welcome bonus. The key to success for an investor is to choose the right broker.
A fractional pip is equal to one-tenth of a pip, allowing currency pairs to be viewed to five decimal places and currency pairs using the yen as the quote currency to three decimal places.
They are also known as Pipettes.
The difference between pips and fractional pips is that a pip represents movement in the fourth decimal place, whereas a fractional pip represents movement in the fifth decimal place.
When comparing pip and pipettes in currency pairs involving the Japanese Yen, the pip corresponds to the second decimal point, while the fractional pip corresponds to the third decimal point.
For instance, if the EUR/USD moves from 1.20500 to 1.20501, then the pair has moved one fractional pip.
In the case of USD/JPY, if the pair moves from 111.100 to 111.102, then the pair moved two fractional pips.
Each fractional pip’s value is determined by three factors: the currency pair being traded, the size of the trade, and the exchange rate.
Based on these criteria, even a tiny pip change might have a big impact on the value of the open position.
Saving half a pip may not seem like much, but traders who frequently close expensive trades and deal with significant sums of money will undoubtedly enjoy this forex market innovation.
A basis point, also known as “pips” or bps, is the smallest unit for measuring fluctuation or change in interest rates or yields on a bond or financial instrument. It is a measure for a 10th of a percentage point.
A basis point is equal to 0.01 percent.
1 basis = 0.01%
100 basis = 1%
A basis point is used when there is a less than 1% tactile change on an interest rate or yield.
Investors use basis points to indicate fluctuations in the yield on business or Government bonds; they buy and sell. Interest rates, determined by the Federal Reserve’s Open Market Committee, plays a vital role in yield fluctuations.
If FRMC reduces federal reserve’s funds, the target interest rate on freshly issued bonds will fall. Conversely, if FRMC increases federal reserve’s funds, the target interest rate on freshly issued bonds will increase.
These changes will have an impact on the cost investors are prepared to pay for old bonds.
If you’re an exchange-traded fund investor, you may be charged an annual fee known as expense ratio; a percentage of assets deducted annually for fund expenditures by your fund management.
Basis points are frequently used in borrowing and investing. The Federal Reserve’s benchmark rate, which impacts mortgage, credit card, and other debentures, changes every 25 basis points at a time.
An index is a grouping of different assets. It continuously monitors their prices and provides an average price point, allowing interested traders to monitor the assets’ overall price movement.
A market index is a market index that measures the price of a number of securities with certain market characteristics. Market indexes are used by a wide range of investors to track the financial markets and manage their investment portfolios.
The market index point is a financial sector concept utilised daily in the stock, bond, and other forms of financial instruments or securities exchanges throughout the world.
A market index point is used to calculate the value of the securities included in the index. Thus, the index point is just a means of expressing the performance of a group using a combined measurement of price and significance.
The complete dollar amount by which a stock or stock index grows or declines is represented by points. Thus, a single point is often equal to a US dollar when it comes to specific values.
When it comes to equities and stock market indices, A “point” will be equal to $1. Since every bond price is proportional to a percentage of $1,000, when refers to bonds or bond market index, a “point” is comparable to $10.
There are forex brokers who quote currency pairs to 5 and 3 decimal places, in addition to the conventional 4 and 2 decimal places.
They are citing fractional pips, which are also known as points or pipettes.
A pipette is just 1/10 of a Pip, which corresponds to the 5th decimal position for most currency pairs or the 3rd decimal position for JPY pairs.
For example, if GBP/USD increases from 1.40502 to 1.40503, the.00001 USD increase equals one pipette.
If the GBP/JPY pair moves from 150.000 to 150.001, the pair moves one pipette.
The significance of pipettes can be found in the spreads offered by brokers. Many brokers quote spreads (the difference between buying and selling prices) using currency rates with five decimal places, implying that spreads are typically stated in pipettes.
For example, the spread on the main pair like EURUSD can be 0.5 pips or five pipettes, whereas the spread on a cross pair like AUDCAD can be 2.2 pips or two pipettes.
As each currency has its own relative value, the value of a pipette must be calculated for each currency pair.
It’s also worth mentioning that many brokers use exchange rates with five decimal places in their trading platforms, so it’s important to tell the difference between pips and pipettes early on in the learning process.
CFDs are popular trading devices that enable customers to bet on the price fluctuations of monetary assets such as gold or oil while owning the fundamental item.
Regulatory organizations oversee all financial market participants, including financial institutions and dealers. CFD brokers’ main objective is to ensure that customers are treated fairly in the financial world.
While trading with CFD, your trade will be fraud protected which mean your money is protected, your transactions aren’t tampered with, and there are no scams.
Additionally, if the broker goes bankrupt in an unlikely situation, customers may be certain all his funds would be properly reimbursed. In this way, the investor is compensated.
Another benefit is the segregation of funds, Compliance guarantees that your funds are not held in the same account as your broker’s.
In this manner, if you make a withdrawal request, a licensed broker will always handle it. Furthermore, there are no free money tricks that other brokers use to attract investors and later create a mess for traders.
CFDs are sophisticated products that carry a significant risk of losing money quickly owing to their leverage.
While dealing CFDs with this supplier, 82 % of regular investor accounts lose money. You should think about how well you can opt to spend such a significant risk with your money.
There are a lot of other reasons why a trader should trade CDF and trade regulating brokers. The most important thing for a trader to choose the right and fair broker for successful and productive trade operations.
Bar candles are an essential part of the trading world for trading charts and reading them. Not only do they provide great information to the traders, but they are also reasonably easy to read and interpret.
Bar candles are made up of an opening foot, facing left and a closing foot, facing right. Each candle includes the open, high, low, and close prices of the prices during trading intervals set by the trader.
Bar candles also show the direction of movement, which includes the upward and downward trends and how far the price moved up during the bar.
Bar candles also have other names. They are often called OHLC Bar Candles or HLC Bar Candles. OHLC Bar Candles is the more popular term and contains information on the open (O), high (H), low (L), and close (C) prices.
The open is the first price traded by the bar. It is indicated by a flat foot on the left side.
It is the highest price traded by the bar and is indicated at the bar vertically.
It is the lowest price traded by the bar. The bottom of the vertical bar indicates it.
The close is the last price traded on the bar, and it is indicated by a flat foot on the right side.
Just like any other financial market, the forex market also has a bid-ask spread. It can be defined as the price at which a currency pair can be bought or sold. In this snippet, we will explain to you in simple terms what is precisely the bid and ask price.
This price is used when selling a currency pair. It shows how much of the quoted currency will be obtained if buying one unit of the base currency.
This price is used when buying a currency pair, the exact opposite of the bid price. Thus, it shows how the quoted currency has to be paid to buy one currency pair.
To a newbie, it might sound tricky. But the truth is, it is straightforward. It means how much of one currency you can get for the other and vice versa.
The most important thing to always remember in this matter is that the bid price is the selling while the asking price is the buying. That is all one needs to remember.
It is essential to know which currency pairs have the lowest (which means the best) spreads when trading.
The currency pairs that are the softest are usually the ones with the highest volume, which include: EURUSD, USDJPY, GBPUSD, USDCHF, AUDUSD, USDCAD, NZDUSD.
These are the currency pairs with the lowest spreads, with EURUSD, GBPUSD, and USDJPY being the lowest of them all.
Of course, there is a whole world full of people out there, and not everyone is making an honest living. Some are out there to scam, so you need to make sure that the broker you are dealing with is authentic.
We all wish life were as simple as opening an account and deposit right away, but unfortunately, that is not the case.
Any company that is being regulated needs to operate within the given regulations. Its regulatory authority imposes these procedures. The process also involves the collection of proper documentation from clients.
You will need the following documents to verify your account, but they can vary based on your country:
A forex continuation pattern is a chart pattern that consists of a series of price movements, which indicate that the current trend might come to a stop, but the trend will continue after the break.
There are two categories of forex continuation patterns: continuation patterns and reversal patterns. Continuation patterns show that after the chart pattern completes its cycle, the price will continue to move in the same direction as before the chart pattern.
In simple words, continuation patterns continue the ongoing trend. However, not every pattern will result in a continuation pattern. Some also result in a trend reversal, where the price moves in the opposite direction of a current trend.
Some examples of forex continuation patterns are flags, pennants, rectangles, and triangles.
Chart patterns are mainly used to explain the activities of the buyers and sellers by presenting the supply-demand dynamic in a visual form.
These continuation chart patterns will show when the bears (supply) are in control and when the bulls (demand) are in control.
Chart patterns and technical analysis help determine who is coming out on top, which helps traders figure out which positions they should take. Overall, forex continuation patterns are crucial to the world of trading.
A reversal pattern is a pricing pattern that indicates a change in the current trend. These patterns indicate that either the bulls or the bears have run out of steam.
As new energy arises from the other side, the established trend will pause and then shift in a new direction (bull or bear).
For example, an upswing accompanied by bullish enthusiasm can stall; indicating equal pressure from both bulls and bears, before succumbing to the bears. As a result, the trend shifts to the downside.
One of the most apparent advantages of these reversal patterns is that they inform the trader about the change of trend and indicate the value of the expected price movement.
Common reversal patterns include the Head and Shoulders pattern, which indicates two smaller price movements surrounding one larger price movement.
Double tops reversal patterns denote a short-term swing high followed by an unsuccessful attempt to break above the same resistance level.
Double Bottoms indicates a short-term swing down followed by an unsuccessful attempt to break below the same support level.
Although these patterns indicate that a continuous trend is about to change, the course of the movement needs to be studied closely as it shows the end of the current one and the start of the next one.
A forex tick measures a minimum upward or downward movement in the price of a security in trading. It can also refer to the change in the security price from one trade to the other.
A forex tick volume represents a price on which the security may fluctuate. It provides the traders with a specific price increment reflected in the local currency associated with the markets. In this, the price of the security trades can change overall.
Tick volume is classified into two types: uptick and downtick.
A forex pair uptick is a trade that is conducted at a higher price than the previous trade.
A downtick happens when a forex pair transaction occurs at a lower price than the previous transaction.
The difference between tick volume and real volume is actually rather considerable, with some estimating it might be as high as 90%.
The term tick volume can also be used to describe the price of a forex pair. An uptick indicates the transaction that has taken place at a higher price, and a downtick shows a transaction taken place at a lower price.
When we hear Heiken Ashi Indicator’s words, we automatically connect it to the Japanese rice trade market, and that is where this indicator was also created to be used.
The Heiken Ashi indicator, also called Heiken Ashi, is a technical analysis indicator and a chart type, depending on what it is being used for.
Traders who figure out the trick to using the Heiken Ashi Indicator can use it to their advantage in helping to determine the trends and trend reversals in a whole range of financial markets.
In addition, this indicator can also be applied to different trading strategies, such as swing trading or day trading.
Translated, the words Heiken Ashi mean “average bar” in Japanese. The formula is used to find the average price movements of a typical candlestick chart.
Since Heiken Ashi takes an average of the price movements, this type of chart shows trend and trend reversals more clearly than the standard candlestick charts.
The Heiken Ashi candlestick pattern is a variation of a candlestick chart that is calculated differently.
As a result, the representation on the chart is a little different. There is no manipulation of data in a simple candlestick chart. But in a Heiken Ashi chart, the candles are based on average prices, the current and the prior timeframe.
It makes the Heiken Ashi charts smoother.]
A line graph is defined as a graphical representation of an asset’s historical price action.
It connects a series of data points with a line. A line graph is one of the most basic graphs used in finance, and it only typically depicts a security’s closing prices over some time.
Line graphs can be used for any timeframe but are most useful in day-to-day price shifts.
A line graph gives traders an accurate picture of where the price of specific security has travelled over time.
Since line graphs only show closing prices, they help avoid noises from less critical times in the trading day, including open, high, and low prices. Along with line graphs, other kinds of popular charts include bar charts, candlestick charts, and point and figure charts.
A line graph is used to show the type of changes that take place over time. The horizontal axis on the chart is usually a time scale that includes minutes, hours, days, months and years.
For example, if you want to create a line graph to see the earnings of any specific business in one week, the horizontal axis would show the days of the week while the vertical axis would show the amount of money earned.
When it comes to the trading world, of course, there are many things that a trader must be aware of, and one of them is a margin call. For example, if you deposit $10 000 in your account, this amount will appear in the equity section once you log in.
When you go through your account, you will see that the used margin is $0.00, and the usable margin is $10 000. It means that you have used none of your account balance, and the total amount remains.
Usable margin is calculated by subtracting the equity (the original amount deposited) from the amount used: Equity-Used Margin= Usable Margin.
If your equity falls below the used margin or is exactly equal, you will receive a margin call. Let us look at a hypothetical scenario.
If you have a margin requirement of 1%, you can buy one lot of EUR/USD. The equity in your account will remain $10 000. The used margin will be $100 because that is the amount it takes to buy one lot. Now, your usable margin is $9 900.
If your usable margin equals the usable margin or falls below it, you will have a margin call.
When it comes to trading, it is always a risky business. In the case of a margin closeout, you must be aware that if such a thing happens to you, you did not pay enough attention to risk management.
Sometimes, if a trader has to face some backlash because of a margin closeout, they tend to become defensive and upset. They think the market is moving against them.
However, they do not realize, however, that they can use this opportunity to their advantage.
There are a few ways by which you can bring yourself out of a setback and prevent it from happening ever again.
One of the first and foremost things to do would be to calm your nerves to reason about what you need to do.
Taking a decision driven by emotions will get you nowhere. As a trader, you need to realize and accept that a business as tricky as this will always be risky.
If you want to be a good trader, you must learn to focus on risk management and not just on earning profits.
Margin closeout is a trader’s safety net protecting the trader from uncontrollable capital loss during a crisis.
Tick charts are helpful to traders because they provide them with valuable information regarding market activity.
Since these tick charts are based on a specific type and number of transactions on a bar, we can see where the market is most active, sluggish or hardly moving.
There will be more bars when there is higher market activity, and fewer bars will print with low market activity. Thus, tick charts are a more logical and relevant way of measuring market volatility.
Many traders use a variety of chart types. A tick chart makes more sense in slow, range-bound markets than a time-based chart, which will just whipsaw you.
When using a tick chart, you can only make transactions once a certain amount of market activity has taken place.
When the markets are experiencing moments of high volume and volatility, tick charts make it easier to adjust.
You need to increase the tick interval. For instance, you can try a 200-tick chart if you generally use a 100-tick chart.
During the lagging periods of low volatility that have characterised the latter parts of the current bull market, on the other hand, you will need to shorten your tick chart interval.
MetaTrader 4 and MetaTrader 5, also known as MT4 and MT5 trading platforms, were launched by MetaQuotes Software Corporation. They are considered to be the most popular trading software tools in the forex market.
MT4 platform started operating in 2005, which is known to be a reliable terminal available on all trading brokers. MT5 terminal was launched in 2010 which is upgraded with some advanced features and great functionality.
In terms of tools, functionality, and features, these trading platforms are different from one another.
MT4 trading platform allows traders to start trading on numerous instruments which are associated with the forex market. FCDs are generally used for trading commodities, indices, forex as well as for cryptocurrencies.
Apart from that, the MT4 platform is equally helpful for smoothly automating your entire trading experience by using algorithms.
The MT5 trading platform was launched after MT4 based on some advanced features and the latest functionality. It has some powerful backtesting functions and is quite fast as compared to MT4.
Furthermore, MT5 also allows multi-pair testing simultaneously. However, MT5 is a bit complex in functionality and structure, due to which beginners mostly avoid MT5 and choose MT4. With MT5, you can trade on indices, forex, indices, or commodities.
ECN stands for Electronic Communications Network. ECN brokers are popular as forex financial experts through which clients can get better assistance about how to perform successfully in a forex market.
Plus, ECN brokers even offer to consolidate quotes from different participants to gain tighter bids or ask for spreads. However, few typical clients associated with ECN brokers are single traders, market traders, or bank organizations.
ECN broker is different from other brokers because it allows the investor to start trading by staying outside the traditional trading market hours.
When choosing a professional ECN broker, you should ask them openly about the trading execution model they use. A reliable broker is always transparent to inform you know about their execution policy and model.
ECN brokers also offer hassle-free ECN accounts, which you can open to have a smooth trading experience.
Being a new trader, it is essential to look for the ECN broker based on low fees and the fastest execution model.
The top 4 ECN brokers in South Africa are:
It is suggested to do a bit of research on each ECN broker and see which one of them is suitable for your trading needs and perform successful trading results. Go for it now!
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