Thought starters for budding local traders

A look at the evolving trading landscape in South Africa.
Image: Shutterstock

I have seen the South African market galvanise and truly move forward over the past eight years. The number of clients entering the trading world is on the up and, by and large, the general population seems far more educated when it comes to financial savvy and the state of the markets in general.

Way back, before I started trading, there were no online trading portals allowing you to become a day trader or to invest online. You had to go to a physical broker, generally with a very expensive office. These brokers would charge exorbitant brokerage fees just for you to participate or buy in to any kind of exchange in the financial markets.

The fact that South Africans – and the world – now have more affordable, accessible ways to participate in international trading means the potential for the person on the street has grown in leaps and bounds. As we enter 2022, more than ever, there are many areas of innovation in products that are going to be offered to retail clients looking to trade the financial markets. And I think the future is looking to be a continuous upcurve.

The most accessible type of trading that’s available in South Africa is CFD Trading (contract for difference trading), which is  pretty affordable and the allotted financial maintenance you have to keep in order to have an active account is relatively low.

If you’re looking to enter the online trading space in this potentially fertile time ahead, first, make sure that your broker of choice is regulated.

Above anything else, that’s the best mechanism you can put in place to protect yourself. This industry unfortunately attracts some of the biggest crooks in the world and we don’t have to go that far back to see the likes of Bernie Madoff and his famous Ponzi scheme hurting people’s livelihoods.

Your second priority should be service. When your platform goes down or there is some sort of glitch, you want to make sure that you’re with a company that has someone on call to answer questions. Finally, do your research and find a broker that is competitive. 

In South Africa, one of the most popular options traders use is a web platform called Sirix, and then there’s a more advanced platform called the MT4 Trading Platform that is software-based (a programme you can download onto your computer). The benefit of the installed version is that the graphs and technical info is more advanced than they are on the web version. And with  smartphones being so prevalent in the market, much of the same technology has also ported to smartphones.

Most trading platforms have demo versions you can try out. And this is important to see which platform or device is best for you, because traders inevitably develop their own preferred style of trading, depending on their preferences and lifestyle. Finding the right fit is very important.

One term that is bounced around in marketing nowadays is ‘fee-free trading’. Be warned, there is a catch. No one works for free and ultimately, fees will be built in somewhere. And the ‘fee-free’ promise also means you’re probably not getting the best executions or service from a genuine regulated company that has high standards. Essentially, there’s a certain standard of educational value your broker should be offering you, too.

What we do with the knowledge we gain from our brokers and how we leverage that really depends on us as individuals. But arming yourself with the right tools and information really can’t hurt.

There’s a lot of research and development going on behind the scenes at brokerages right now, and the promising thing for the ever-growing South African market is that brokers have to consistently innovate to stay relevant to their clients, because every day, people are becoming more savvy. And that is something I see growing immensely in SA in the immediate future.

Fred Razak is chief trading strategist for CMTrading.

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