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Is Forex Trading Legal in South Africa?

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Do you want to know if forex trading is legal in South Africa or not? Which brokers in South Africa are known to offer the best trading services?

Since there are no laws governing legality in South Africa, it is legal to trade forex. However, the South African Reserve Bank monitors outgoing African cash flow, which controls international monetary exchange.

Traders can trade forex if they comply with money laundering laws and declare their income taxes. Although it is not a major legal requirement to use a regulated broker, brokers are regulated by the FSCA and other recognized international organisations.

How to legally fund forex accounts?

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In South Africa, you can fund an account reasonably quickly if you have a credit card issued by a central bank. Although, financial regulations in South Africa can sometimes prevent us from funding international accounts using South African bank accounts or locally lesser-known credit cards. The problem is decreasing, but we still hear that it persists.

South Africans now have easier access to off-shore banking, making it easier to fund a Forex account. South African citizens may still transfer up to 10 million Rand overseas, but there is still a limit.

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How much maximum money do you need to start trading forex in South Africa?

Each broker has a different minimum deposit requirement. For South African traders, the lowest minimum deposit requirement we found was R76 with ZAR accounts brokers or USD 5 with Hotforex Micro accounts and XM‘s Micro accounts.

Beginners are recommended to use a leverage of not more than 1:10 to reduce risk. In addition, trades should be balanced so that you will not be overtrading and risking a great deal of capital for each trade with high leverage.

What is the best way to start trading forex in South Africa?

Forex trading in South Africa is easy if you follow these four steps:

  1. For beginners, you should learn about the basics of forex trading, such as “what is forex trading,” “leverage risks,” and its basics and strategies.
  2. FSCA regulated forex brokers are licensed & regulated by the FSCA, so South African traders should opt for them.
  3. Choosing a forex broker and opening a trading account: The next step is choosing a broker and opening a trading account with them. As many brokers offer ZAR trading accounts, you can open one based on your needs. For a live account to be funded, KYC documents need to be submitted.
  4. The forex trading platform can be downloaded once your account has been established. Moreover, mobile platforms for MT4 are available at most brokers nowadays.

Do you know if forex trading is legal in South Africa?

South African traders can trade forex legally. However, South African traders must comply with all anti-money laundering laws and make sure they deposit and withdraw their funds legally and report their earnings to South Africa’s Revenue Service (SARS).

However, it is recommended that South African traders should use an FSCA regulated forex broker or a top tier 1 regulated broker like FCA or ASIC to safeguard their capital and ensure fair trading conditions.

Forex trading in South Africa: where can I find it?

FSCA and Tier 1 forex brokers like FXTM, HotForex, Avatrade, XM, and Exness allow you to trade forex and CFDs.

For traders in South Africa, it is recommended to trade with FSCA-regulated brokers since this would allow you to address grievances with the broker rather than with an unregulated broker.

Be sure to check whether the broker offers ZAR-based trading accounts & local deposit and withdrawal options.

Forex trading in South Africa is regulated by whom?

In South Africa, a financial regulatory agency, the Financial Services Board (FSB), oversees the non-banking financial sector.

It is an independent agency, like the FCA in the UK or the National Futures Association in the United States. Additionally, the FSB oversees the largest stock exchange in South Africa, located in Johannesburg.

Despite this fact, FSB-licensed Forex brokers are pretty rare. Due to ease of use and better conditions such as more payment options, tighter spreads, and even account bonuses, most trading is done through off-shore platforms.

Is it profitable to trade forex?

The forex market does not guarantee profits. Professional currency traders can make money by trading forex, but most retail day traders lose money.

According to industry statistics, over 75% of retail forex traders and CFD traders lose money. Inexperienced traders should therefore stay away from forex. This requires strong risk management skills & years of experience.

What is the number of forex traders in South Africa?

According to some reports, South Africa has 200,000 forex traders. That number may even be higher because the industry is increasing.

There are more traders here than anywhere else in Africa. As a result, South Africa’s average monthly deposits are estimated at USD 742 or R12,900.

Forex regulations in South Africa

Local traders use forex trading because it is authorised and popular. Forex trading is regulated by the FSCA (Finance Service Conduct Authority), which ensures no illegal activities are occurring on behalf of either traders or brokers.

To conduct business in South Africa, brokers from outside Africa must be FSCA-licensed. In addition, they must have a central office in South Africa and meet the minimum operating capital requirements.

Securities such as Contracts for Difference (CFDs) can be volatile, which is why brokers should ensure their traders are prepared for it.

Local traders can access derivative securities on the Johannesburg Stock Exchange under the condition that they have screened their clients before allowing them access to such volatile products. In addition, Johannesburg Stock Exchange traders can trade foreign exchange derivatives.

It is not prohibited for the nation’s citizens to use foreign brokers not licensed by the FSCA. Still, they are highly recommended to use brokers licensed by a leading jurisdiction (the UK, Cyprus, or Australia).

When it comes to funding an account, traders will find it much easier if the broker is licensed locally. You often have to deal with foreign banks when dealing with foreign brokerage firms, which means currency conversions.

While funding with a credit or debit card may be more convenient from a convenience standpoint, a regular wire transfer is more secure. It allows you to send a more significant amount of money, primarily if your broker is based overseas. Additionally, choose brokerage firms offering ZAR-based accounts (instead of USD or EUR accounts). Currency exchange fees will be avoided this way.

Regulation of the financial sector in South Africa

A few years ago, South Africa introduced a dual regulatory system. The two independent bodies each have their specific responsibilities.

The Financial Services and Consumer Agency (FSCA) regulates the activities of companies providing financial services, including forex brokers. In addition, this department handles licensing, and companies that violate guidelines can also be sanctioned.

South Africa’s Prudential Authority is another regulatory body. The agency monitors financial institutions other than banks. In addition to market infrastructure cooperative and financial conglomerates, this entity has the primary mandate of regulating nonbank financial institutions.

South Africa’s Reserve Bank performs a well-defined role. This ensures that the region’s financial markets remain stable, issuing the local ZAR currency (both bills and coins) and managing the nation’s gold reserves.

Funds transfer to a South African trading account

You should be able to deposit money into your forex account quickly. Traders typically use local bank transfers or credit cards for this.

A South African can only send 999,999 ZAR to a foreign destination per year. However, the process of applying for a fiscal exemption is simple for investors who wish to invest more. It’s also possible to invest with a local broker, which won’t require you to send funds abroad.

Also accepted by brokers in South Africa are e-wallet transfers from providers such as Neteller, Skrill (the former Moneybookers), and PayPal. These advantages are that they are faster than bank transfers while offering the same high level of fund safety.

The more recent and local bank-to-bank transfer solution is EasyEFT. You can search for your bank and then fill out and submit the interface’s required information. Investec, FNB, Standard Bank, ABSA, and Capitec are just a few banks that support this safe and fast system.

Two local options are supported by many South African brokers, PayU and PayFast.

South African brokers offer forex trading software

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Typically, forex brokers will offer you free software on their websites to trade currencies. We can safely assume that all trading software will offer technical indicators as of 2020 (which is excellent for analysing price action).

In addition, it should be assumed that all brokers in South Africa offer free demo accounts, so you can check the software’s capabilities and interface in real-world market conditions.

Many professionals also use Demo accounts to test new strategies or fine-tune their trading methods.

MT4 or MT5 (MT refers to the MetaTrader platform), or both, are available from most brokers. Its whole success is due to the ease of use of its interface, which makes it the most popular trading software worldwide.

The two versions have two main differences: MT4 is only designed for currency pair trading. At the same time, MT5 allows simultaneous trading of multiple asset classes (futures, shares, commodities, precious metals, indices, etc.).

Mobile devices are increasingly used for trade in South Africa

In South Africa, more than half of all web users and shoppers rely on smartphones. With the advent of mobile apps for Metatrader, brokers are offering traders the ability to access their positions and trade on the go from anywhere. This is both possible on Android devices and Macs.

These apps can zoom into charts, buy with a single click, adjust stop-loss levels, and more.

You never have to fully miss a single trading opportunity since many economic reports usually drop in the middle of the trading day, regardless of whether you prefer your phone or tablet (or your home/office desktop computer)!

Related questions-FAQs

1.   If I live in South Africa, how should I choose a broker?

Unregulated brokerage firms should be avoided. It doesn’t matter whether they are licensed in Cyprus or have an FSCA licence, as long as a legitimate jurisdiction licences them! Do not let inflated bonus offers to influence your decision, and keep in mind that leverage of 500:1 isn’t always best unless you have a proven track record.

2.   Is there a currency pair based on ZAR?

Since the rand is somewhat volatile, several investors are attracted to currency pairs such as GBP/ZAR and USD/ZAR. As a result, the CHF/ZAR and the AUD/ZAR are becoming increasingly popular ZAR pairs.

3.   Will my income from currency trading be taxed?

Forex profits are, unfortunately, taxed. Rates range from 19% to 39%, depending on how much you make. When you’re uncertain how to report it, your broker can usually assist you.

4.   Do I need to be aware of any hidden fees?

Forex trading is usually free, as a tiny commission is built into the spreads. However, if you trade other assets (indices or shares, for instance), you may be subject to additional fees. Furthermore, you may have to pay a small transfer fee when transferring profits from your account to your credit card or bank account.

5.   Can you trade currencies if you’re underage?

To trade forex, you must be over 18 to open a demo account.

Bottom line

Africa’s most advanced nation is, without a doubt, South Africa. The Reserve Bank of South Africa issues the local currency, the ZAR, or rand. This country belongs to the G20.

Even though it has many natural resources, including precious metals, it heavily depends on trade with Europe, the USA, and Asia.

South Africa’s open economy has encouraged currency trading. In 2018, over $20 billion was traded, making it Africa’s largest forex market. However, Namibia’s forex trading volume is only 10% of South Africa’s.

In terms of worldwide trade, South Africa’s currency, the rand, ranks 19th.

Due to more challenging conditions in Europe, many forex brokers are turning their attention overseas. Thanks to its healthy economy and low operating costs, South Africa is a popular choice.

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