How to find a Forex Broker in South Africa that will keep your money secure

With an estimated 200,000 traders, retail online forex trading is widespread in South Africa, and more young people appear to be embracing this trend.

Choosing a broker may be difficult since they do not all charge the same fees or provide access to the same amount of instruments, so assess the characteristics that are most essential to you and consider your trading style before settling on one.

Before you register an account with a broker, there are a few things you should verify and compare.

Regulation

All financial institutions in South Africa, including banks, brokers, insurers, and retirement plans, are regulated by the Financial Sector Conduct Authority (FSCA). Each licensee is assigned a unique Financial Service Provider (FSP) number. They also conduct on-site inspections, in which they physically investigate brokerage firms and demand documentation, as well as off-site inspections, in which they control brokers remotely from their own offices by requesting reports, paperwork, and financial data, among other things.

Every forex broker must have a license, which might come from the FSCA or another country's regulatory authority. Trading with a forex broker who holds an FSCA license, on the other hand, is safer for South African traders since such brokers are regulated by the FSCA and may be sanctioned if they violate FSCA regulations and standards. The FSCA will guarantee that a forex broker's accounts are blocked and cash restored to their clients if they go bankrupt or choose to be dishonest.

To see if a forex broker is licensed by the FSCA, look up their FSP number or entity name on the FSCA website at www.fsca.co.za and verify it on the Authorized FSP search page. Here you can look up information about the broker such as Contact Details, Compliance Officer, and Products Approved, among other things. This, according to Safe Forex Brokers SA, is a very useful tool for determining whether the broker is providing you with accurate information on their website and in person.

The FSCA also licenses OTC derivatives providers, to which CFD providers operating as principal must apply, and several forex brokers have done so. However, only 21 FSPs have been certified as ODPs to provide OTC derivatives at this time.

The list of approved ODPs may be found on the FSCA's website, where you can find it by going to fsca.co.za > regulated entities > list of regulated entities and individuals > OTC Derivatives providers > leaving the entity name blank and clicking search. When the search results are displayed, keep an eye out for the entities' application status, since some of them say “Approved,” while others say “Applied,” and yet others say “Application withdrawn.” Only pick FSPs having the status “Approved” on their application.

Financial service firms have seen several security breaches in recent years.

In 2015, hackers penetrated the computers of FXCM forex broker, resulting in fraudulent withdrawals from traders' accounts, and in 2020, hackers breached the servers of ABSA Bank, stealing important information.

While one cannot manage security at the broker's office or what occurs in the broker's data center or servers, one may confirm that the trading App has basic security measures before using it. Two-factor authentication (2FA), a password strength indicator, and compliance with South Africa's Protection of Personal Information Act are among these characteristics (POPIA).

Investigation and Reviews on the Internet

According to Safe Forex Brokers SA, there are roughly 20+ brokers in South Africa who offer forex trading applications, but only a few of them are FSCA-licensed. Before you place any money with a broker, you should verify historical complaints, regulatory actions, and online 3rd party reviews.

Even if a broker is licensed and has a fantastic trading software, they may opt to conduct responsibilities that are not covered by their license (like offering unapproved products). You might conduct an internet inquiry using Google to check whether the forex broker has been involved in any legal issues with the FSCA or other foreign authorities.

The FSCA brought JP Markets to court to seek their liquidation for conducting an unauthorized over-the-counter derivatives operation. They did, however, file an appeal, and the FSCA's decision has now been stayed by the Supreme Court of Appeal.

Other examples include the case of Oinvest, a forex trading business whose license was revoked by the FSCA and which was taken to court and had its accounts frozen for violating parts of the FAIS Act. The FSCA also suspended ZAR x (PTY) Ltd's exchange license for failing to comply with section B (1) (a) of the financial markets Act.

All of these examples should teach traders to constantly double-check that a broker is licensed to operate a forex brokerage firm and not another financial service before using them, and this is the counterparty risk that traders face. Such information about a broker's background might help you decide whether or not to work with them.

Also, examine customer evaluations regarding the broker's trading App in your online App store. People will submit negative reviews on the App if it is awful. Traders using the Apps will protest if the broker takes too long to pay them their money or if deposits do not appear in a timely way.

Costs Forex brokers impose a variety of fees, some of which are termed hidden fees since you are unaware of them until you are in the middle of a complicated transaction.

Many beginner traders find it difficult to grasp the numerous fees and costs associated with online forex trading, including as spreads, commissions, and overnight fees.

The amount of fees you'll pay is determined on your trading style.

If you are a scalper who gains from little price movements in a currency, you will be establishing and closing positions frequently and will be paid commissions every roundtrip, therefore you may wish to choose a broker with cheaper commissions.

If you're a swing or position trader who maintains positions for weeks or more, round trip commissions will be reduced, but you'll have to pay holding costs if you use a higher interest rate currency to buy a lower interest rate currency and leave the position open overnight.

The fundamental fees listed below should be checked and compared to see what rivals charge.

The difference between the Bid and Ask price of a currency pair is known as the spread. If the EUR/USD Bid/Ask price is 1.01/1.04, it suggests that market participants are prepared to pay 1.01 for the currency pair, but brokers are adamant about selling it for 1.04 in order to profit from the 0.03 spread (1.01 -1.04 ). This 0.03 difference is paid to the broker.

If you purchase from the broker for 1.04, you must sell at 1.01 and incur a loss of 0.03 since that is what the market is ready to pay. As a result, the larger the spread, the greater the impact on your profits. Brokers profit from increasing spreads, therefore keep spreads narrow, especially for heavily traded large currency pairings like the EUR/USD.

Deposit - Be aware that most brokers do not charge a fee for deposits. Check the time it takes for the deposit to appear in the account as well.

Withdrawal — Some brokers levy this fee when you withdraw funds, while others do not.

Account inactivity — Some brokers will charge you if you don't use your account for a long period of time, while others will not. If you are not planning on trading frequently, you may want to look for a broker who does not charge this fee.

Some brokers charge commissions each time you start a new trading position. Some brokers, on the other hand, do not charge anything and rely on spread to generate money.

Instruments for risk management

Because the forex market is so volatile, proper risk management is essential. At the very least, your broker should be allowed to place stop loss orders. Once a predetermined “stop price” is crossed, a stop loss order is an automatic order sent by the broker to the customer to liquidate his open positions and execute a market order for the next available price.

Some brokers provide a Guaranteed Stop Loss Order (GSLO) as an upgrade to the standard stop order, which protects you from price gapping that might occur when the market is closed. When the value of a currency falls so dramatically that it jumps over the stop price, forcing you to execute a market order at a price different than your stop price, this is known as gapping. GSLOs are superior to regular stop orders in that they guarantee that your stop loss order is executed at the precise stop price, not below or above it. GSLOs are typically expensive, so you'll have to pay for them.

Platforms for trading

To meet your trading needs, your forex broker should provide you with many trading platforms, such as Metatrader 4, Metatrader 5, online trader, mobile app, and so on.

Account domiciliation in ZAR

To prevent incurring unnecessary currency translation fees, your forex broker should provide trading accounts in the Rand currency.

Customer service

Your forex broker should offer a variety of customer support options, such as live chat, toll-free phone lines, rapid responses to email enquiries, and swift dispute settlement, among others. This makes it easy to reach a broker in an emergency, especially on weekends.

WikiFX

When choosing a forex broker, it is imperative that you trust the broker that you choose. Traders should be wary of scams and unfair practices toward their clients. WikiFX allows traders to evaluate and verify their brokers. Users can check other users' testimonies and verify brokers' registration. WikiFX is the ideal app used for traders to prevent broker scams.