Currency trading has a history that can be traced back to the Middle Ages, when currency had been traded through international banks and thus helped Europeans to spread currency trading in both Europe and the Middle East.
The Golden Monetary System was established in 1875, and this is considered the most significant event in the history of currency trading, followed by the introduction of exchange rates in 1947 when the IMF started its operations.
Over the years, and as technology improved, Forex trading began to become more widespread in addition to easier, especially when computers were invented prior to an increase in availability and distribution thereof.
Forex trading increased significantly over the years, and in 2004 it developed into a $ 1.9 tonne a day market and today it is the largest financial market in the world.
Today, the Forex market sees currencies trading at about $ 5tn a day. Forex is traded over the counter, which means that all trading is done electronically and by telephone by banks and other market participants.
Currencies are what make up the Forex market and most of the volume is concentrated in a small number of currencies such as ZAR, USD, EUR, JPY, GBP, CAD, CHF and AUD.
These currency pairs are considered Forex Major currencies and more often they are not paired with one another such as EUR / USD, USD, JPY, GBP / USD, USD / CHF, USD / CAD and AUD / USD.
The US dollar remains the top currency against which all other currencies are weighed and traded as it is the global reserve currency as the United States has the world’s largest economy paired with a stable political system.
Forex brokers in South Africa
To start trading Forex in South Africa, the trader concerned must select a broker through which trade can be conducted. There are various brokers that cater to South African dealers.
The most important thing to look at when choosing a broker is to ensure that the broker is regulated by a reputable licensing entity.
While offshore accounts are attractive because of higher levels of leverage offered, in the midst of other features, choosing a reputable broker is critical to ensuring customer funds are secure and that merchants will not lose more than they are willing to invest when trading.
There are many Forex brokers to choose from, and when evaluating brokers, it comes down to the needs of the trader who decides which broker is best suited to their needs.
Numerous brokers offer several products and services, some of the best brokers recommended for South African dealers include, but are not limited to:
These brokers have comprehensive and competitive offerings, in the midst of various other functions that cater to a variety of brokers, whether beginners or more advanced traders, seeking a broker that will give them a more competitive advantage for trading.
It is important for traders to evaluate the level of service they can expect to receive from different brokers by evaluating practical reviews on these brokers, allowing them to make an informative decision supported by reviews from other traders.
It is not advisable to select a broker according to the reviews and ratings received by the broker, but the trader must visit the broker’s website and open a demo account to further explore the broker’s offer and determine if it is suitable for the trader.
Forex trading in South Africa mid Covid-19
During 2019, foreign exchange market volatility was fairly low and brokers experienced markedly low customer activity, but since the beginning of 2020 and the emergence and spread of Covid-19 worldwide, market volatility has been the highest they have ever been.
The pandemic has meant that off-the-market volatility has been where brokers are some of the biggest beneficiaries of this, while the rest of the world has felt the significant pressure brought on by Covid-19’s impact on business sectors and economies.
Since the end of February, brokers have seen this significant increase in trading volumes as the pandemic spread from one country to another.
With unstable markets as a result of Covid-19, short-term traders have been given ample opportunities to take advantage of market volatility, especially day traders, and intraday traders trying to call the bottom, resulting in large profits.
South Africa’s economy has been hovering over crises and crashes long before Covid-19 emerged, and in its wake, with the write-down of the rand, ZAR is more or less at the same level as AUD.
The USD / ZAR currency pair breaks above historic resistance of R18.31 / $, where it had only been at the R16.45 / $ level in March with proposed gains expected as long as the pandemic continues.
How to shop safely during the Covid-19 pandemic
While there are several traders, especially short-term day traders who use the pandemic and unstable markets to their advantage to increase the chances of high profits, traders should always proceed with caution.
This can provide ample opportunity for dealers in learn new trading strategies These are high market volatility, but for those who are not entirely willing to risk it, it is advised that they act as usual with the necessary precautions in place.
While traders may struggle to wrap their heads around how currencies respond to Covid-19 as the pandemic continues and the influx of news from around the world, traders are advised to take a break from trading.
It is also recommended to invest in currencies with a safe harbor such as JPY and CHF, with continued volatility in the foreign exchange market, as the pandemic does not adversely affect the country, its economy and thus the currency.
Traders who rely heavily on basic analytics to determine their trading strategy are always up to date with the news, but it is recommended to keep up to date with all Forex related news regarding Covid-19.
Forex trading itself is complex and while there is ample opportunity to make big profits, the risks involved must be evaluated and traders must have a clear understanding of what they stand to lose beyond their available capital to offset loss.
South Africans who would like to start trading Forex need to make sure they choose a regulated, reputable broker who can meet their trading needs.
In addition, South African traders need to be aware of the risks of trading Forex under Covid-19 circumstances along with ensuring they manage their risks effectively while keeping abreast of news sources to ensure they manage their trading activities accordingly. .