Whilst the forex market is one of the biggest entities of its type anywhere in the world, it’s also extremely volatile and not safeguarded by an international regulator. This is why regulators in South Africa are still in the midst of their forex rigging probe, more than three years after financial watchdogs in the west issued multi-billion-dollar fines to global banks.

The lack of efficiency showcased by the SA Competition Commission is concerning for forex traders, particularly those who are based in the region or include the South African Rand (ZAR) in their portfolio. This is currently ranked as the 20th most traded global currency by the Bank of International Settlements, whilst the nation’s population of 50 million continues to drive a growing economy.

In this post, we’ll provide some tips for forex traders who want to build a successful portfolio in South Africa. These include.

The Best Hours for Forex Trading

When Are the Best Times to Trade Forex? Currency trading is unique because of its hours of operation. The week begins at 5 p.m. EST on Sunday and runs until 5 p.m. on Friday.
  • U.S./London (8 a.m. to noon): More than 70% of all trades happen when these markets overlap because the U.S. dollar and the euro (EUR) are the two most popular currencies to trade, according to Lien. 
  • Sydney/Tokyo (2 a.m. to 4 a.m.): This time period is not as volatile as the U.S./London overlap, but it still offers a chance to trade in a period of higher pip fluctuation. 
  • London/Tokyo (3 a.m. to 4 a.m.): This overlap sees the least amount of action of the three because of the time , and the one-hour overlap gives little opportunity to watch large pip changes occur.

Understand your Tax Requirements

Before you begin to build your portfolio, you need to understand how your forex trading profits will be taxed.

This is governed by the South African Revenue Services (SARS), which taxes profits for all individual traders who are based in the country using the same model that’s applied to regular income.

Overall, tax rates range from 18% to 42% depending on the level of profit generated by traders, depending on the individual tax bracket in which they sit.

So, before you begin to select currency pairings and build your portfolio, you need to estimate your future tax repayments and understand how this will impact on your profitability.

Partner with a Reputable Broker

Once you’ve determined your tax status and built a wealth of theoretical knowledge, the next step is to partner with a reputable and secure broker.

To begin with, this provides you with access to a so-called “demo account”, which enables traders to test their strategies in a real-time, simulated marketplace without requiring them to risk their hard-earned capital.

Typically, you can use a demo account for a period of between three to six months, as this should afford you time to hone your strategies and translate knowledge into practical trading skills.

When you partner with a global brokerage site like Oanda, you can also access a wide array of currency pairings that enable you to diversify your interests. Similarly, you’ll also be able to access different markets and asset classes as you look to develop your skills over time.

Minimize your Risk as you Continue to Diversify

As you continue to diversify and build your forex trading portfolio, it’s also likely that you’ll use a high leverage ratio and margin in a bid to control a significantly larger position with a relatively small amount of money.

The issue with this strategy is that it magnifies losses as well as profits, so you could lose more than you can actually afford if the market turns against your trades and makes your position vulnerable.

If you leverage a position too much, you may even find that an adverse market shift could wipe out even the most balanced portfolio.

So, try to adopt a balanced approach to maximizing profits as a forex trader, whilst imposing stop-loss measures to safeguard your capital in the worst-case scenario. This automatically closes positions once they’ve absorbed a predetermined level of loss, and it can make a significant difference for new or inexperienced traders.