How much do you need to start Forex in South Africa?

What is Forex Trading?
Forex trading is the exchange of currencies to make a profit from fluctuations in the exchange rate. To open a trade, a trader must choose a currency pair, and the direction they expect the exchange rate to move. As the exchange rate between the two currencies changes, the trader can close the trade for a profit or a loss. More detailed information on how Forex trading works is here.

How do you trade Forex in South Africa?
To start trading, a participant will need access to a market where currencies pairs can be bought and sold. A Forex broker is the only way to access the market and depending on how the brokers are set up, either the broker will maintain the market (market maker) or offer a direct connection to the international market (direct market access). Either way, a trader will need to create a trading account at a brokerage and set up a trading platform to get started.

What is the difference between trading Forex and trading equities?
When we think of investing, we often hear about trading of equities on the stock market, and mistakenly include Forex trading in the same grouping. Forex trading is a form of CFD trading and differs from investing in equities in several ways.

Currencies are traded in pairs, where equities are physical shares that are purchased for cash. Trading currency pairs means that as you buy one pair, you are selling the other at the same time. This simultaneous buying and selling of currencies acknowledge that it is the relative value between the two currencies in the pair that creates profit.

The Forex market is a decentralised over-the-counter exchange, where all transactions and participants are confidential, unlike stock markets, which are centralised and where public records are kept of buyers and sellers.

An attractive element of currency trading is the low cost of entry. In order to make substantial profits, equity traders use large amounts of capital, obviously not an option for investors with limited incomes.

Forex trading is not investing. Any transaction on the Forex or CFD market does not give the trader partial ownership of the asset being transacted. In this case, the trader is speculating on the future value of the assets involved in the trade. Thus, to call it an investment would be incorrect as traders are only speculating on the value of the assets.

Currency pairs are leveraged products. Leverage enables the trader to make much larger trades than what their account balance allows by borrowing additional funds via the brokerage. Leverage means that any profits are magnified, but so are any losses. Traders are responsible for the losses for the full trading amount — as such, using high amounts of leverage can lead to significant losses.

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How do beginners learn to trade Forex?
Beginners are advised to learn to trade using a demo account before depositing money into an account. We have a guide full of practical advice to get you started, and more on how to place your first trade.

It is going to take years to learn how to trade CFDs successfully, as traders need to study the many components and strategies to make trades more successful. We cover a set of strategies and tips in our learn to trade section.

How much do I need to start trading Forex?
Trading accounts can be opened for as little as 5 USD (70 ZAR), but a recommended deposit is between 200 USD to 500 USD. A minimum 200 USD deposit is advised because your account balance is going to determine how much leverage you can use, and should your account balance be too small, then trading with leverage will be impossible, or your trades will be closed because of an insufficient account balance to cover losses.