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How To Avoid Scam In Forex Trading In South Africa

While cryptocurrency trading is the most popular method to invest in South Africa, it lags well behind forex trading compared to the safety, popularity, and convenience of access. Trading in cryptocurrency is mainly uncontrolled, and there is a steady stream of frauds in the headlines. And this is where Forex trading excels.

If a Forex broker has a South African office, it must be licenced by the Financial Sector Conduct Authority (FSCA). The FSCA is a national organisation that can shut down brokers if they accuse them of defrauding their customers or acting unethically like JP Markets did last year.

But just because the FSCA has the authority to enforce rules and shut down unscrupulous actors doesn’t mean they find everyone attempting to defraud South Africans. Hundreds of individual con artists use Forex trading as a mask to trick their victims for every unscrupulous broker. Fortunately, there are a few essential tips for avoiding scams and selecting the best Forex broker South Africa to trade with.

Do Your Research At Tradeforexsa

Conducting your study is the most excellent way to avoid falling into this trap. The FSCA maintains a list of all regulated Forex brokers licenced to operate in South Africa. Any broker or anyone supplying a financial service to open forex account in South Africa it must register as a Financial Service Provider (FSP). All reputable brokers will include their FSP numbers at the bottom of their websites. If you are contacted on social media, whether it is Facebook, Instagram, WhatsApp, or Telegram, always do rigorous research before spending money.

Check To See Whether Your Broker Is Licenced.

While the FSCA is the South African regulator, other regulators exist worldwide. The UK’s Financial Conduct Authority (FCA), Australia’s Securities and Investment Commission (ASIC), Singapore’s Monetary Authority (MAS), and the EU’s Cyprus Securities and Exchange Commission (CySEC) are often regarded as the world’s most stringent regulators. If your broker is not regulated by the FSCA but has a licence from one of these other bodies, you may trade with them confidently.

Forex brokers give traders access to the Forex market for a fee. You may calculate the overall trading cost by adding these fees together. Trading prices vary greatly amongst brokers, so it’s always a good idea to figure them out before you spend any money. While the first deposit is the most visible expense to a trader, it is not a charge. The deposit is the money you will trade with, and it will not be given to the broker but will be maintained in a trading account.

The Spread, Commission, And Overnight Switch Fee Are The Three Primary Costs Levied By Brokers

The spread is the difference between the prices of an asset’s sale and purchase and is measured in pips. The narrower – or “tighter” – the spread, the less expensive it is to execute a deal. Some brokers provide very narrow spreads (sometimes as low as 0 pips) yet demand a fee.

When a transaction is opened, the commission is charged again when it is closed. The sum of these two commissions is referred to as the “round turn” commission.

The Overnight Switch Cost Is The Ultimate Fee.

The broker charges this fee for keeping a trading position active overnight. The switching charge varies across brokers, so double-checking before leaving a deal open overnight is always a good idea.

Looking at the spread and fee while trading one lot (100,000 units) of EUR/USD is a standard way to analyse trading expenses. If you’re looking for a Forex broker, choose one with the lowest spread on the Euro to US Dollar, the world’s most actively traded currency pair. A good Forex broker, for instance, would provide a distance of less than one pip between the Euro and the US dollar with no commission or the same distance with a round turn commission of $6 or $7.

Bottom Line:

It’s vital to note that Forex trading is a high-risk gamble, with 60-90% of South African Forex traders losing money. To be successful, traders must approach the Forex market with prudence, respect, and an open mind. And there’s no need to make Forex trading further risky by using an unethical Forex broker.

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