Best FOREX Brokers in South Africa for 2024

With so many choices out there, it's hard to select the best trading platform in South Africa. In this case, we've done the work for you. Here is a summary of each of the top brokers according to specific criteria, along with their pros and cons:

1. ICM - Capital 91.10: Best Deposit and Withdrawal Broker

2. Tradeview - 90.00: Trusted broker that offers very low trading costs as well as comprehensive financial literacy materials for its clients.

3. XTB - 85.55: Best Customer Service Broker

4. IG - 85.45: Best Regulations Broker plus Convenient Platform

5. Saxo Bank - 80.09: Excellent Private Trading Platform

6. CMC Markets - 80.07: More than 9,000 Assets

7. ThinkMarkets - 80.05: Aimed at the Audience of Traders

For every FOREX trader, it is good to know that the FOREX market is the largest financial market in the world with some six trillion dollars’ worth of deals taking place daily. In this decentralized market, currencies are bought and sold electronically over the counter (OTC). The FOREX market operates 24 hours a day, five days a week, excluding international holidays. This article will help you understand the implications of round-the-clock trading for market participants. Explore the pivotal role of the best FOREX brokers in South Africa and learn how they facilitate clients' participation through trading platforms.

Regulation and Licensing in South Africa

Trading FOREX is legal in South Africa, as long as it does not contravene money laundering or exchange control laws. FOREX brokers operating in South Africa must be regulated by the FSCA, a tier-2 oversight body.

The broker must also be in good standing with the Companies Intellectual Property Commission (CIPC), which is responsible for company registration. Traders must declare all profits to the country’s tax authority, the South African Revenue Service, and readily comply with Know Your Customer (KYC) requirements. Islamic FOREX trading is supported.

Notwithstanding local regulations, it is always important to check if your broker is regulated by overseas tier-1 regulators. Some examples of the most stringent regulators include the Financial Conduct Authority (FCA) and the Cyprus Securities and Exchange Commission (CySec). These regulators have sweeping powers, but they also mandate member brokerages to compensate clients for lost funds through broker insolvency.

Although the FSCA calls the shots in South Africa, there are other major regulators around the world. If you want to read more about some of the best-regarded regulators, read our article on regulation here. As we have said, as someone resident in South Africa, it’s enough that your broker is regulated by the FSCA.

Leverage

Stop Out and Margin

As a FOREX trader, it's crucial to understand the most important terms you'll encounter to avoid going into a negative balance. One of these terms is "stop out," which refers to a situation where a broker automatically closes some or all of your open positions to prevent your account from going into a negative balance. To be clear, this is an unwanted position to be in as a trader because it means you haven't planned well.

This is especially relevant for traders using leverage. The stop-out level is typically expressed as a percentage, representing the margin level at which the broker starts to close out open trades.

Here are the three most common stop-out levels:

0% Stop-Out Level: 

At this level, when the margin level of the account drops to 0%, the broker will automatically close all open positions. This is the most aggressive stop-out level, and it gives no room for your positions to recover, even if the market turns in your favor immediately after reaching this level.

Here's how it works:

Imagine you have a trading account with a balance of ZAR10,000, and you've opened several positions in the market. Your broker has a 0% Stop-Out Level policy, which means that if your margin level drops to 0%, they will automatically close all your open positions to prevent further losses.

• You start with a R10,000 trading account balance

• Using 50:1 leverage, you can control R500,000 worth of currency with your R10,000 account

• You open a position in ZAR/USD with a notional value of R500,000, and the margin required for this trade is R10,000 (2% of the notional value)

• The market moves against your position, causing your account balance to drop to R9,000

• If your losses accumulate, your account balance decreases, and your margin level (account equity divided by used margin) drops accordingly 

• When it reaches 0%, the broker's 0% Stop-Out Level policy comes into play

50% Stop-Out Level: 

Here, if the margin level drops to 50%, the broker will start closing out positions. It offers a bit more flexibility compared to the 0% level. The broker will typically close the most unprofitable positions first, and if that's not enough to bring the margin level back above 50%, more positions will be closed until it's achieved.

100% Stop-Out Level: 

A 100% stop-out level means that when a trader's equity equals the margin required for the open positions, the broker will start closing those positions. It's important to know that this is like the 0% level but might be worded differently based on broker terminology.

It's worth noting that while stop-out procedures are meant to protect you from negative balances, they can lead to significant losses in volatile markets if positions are closed automatically, especially if the market quickly reverses after the stop out. As such, using protective measures, like stop-loss orders and not over-leveraging, is always a good idea. Additionally, the specific percentage and the order in which positions are closed can vary among brokers, so you need to be aware of your broker's policy on stop-out levels.

Commissions and Fees

Trading fees are not always easy to monitor. Be sure to check how these fees compare with other brokers:

Spreads: In FOREX trading, a spread is the difference between the price at which a trader can buy (ask) and the price at which they can sell (bid) a currency pair. The spread can be categorized into two main types: fixed and variable.

Fixed Spreads: As the name suggests, fixed spreads remain constant regardless of market conditions. They don't change during the day and are set by the broker. Some traders prefer fixed spreads because they provide predictability, especially during times of high market volatility.

Variable Spreads: These spreads fluctuate based on market conditions. During times of low liquidity or high volatility, variable spreads can widen. However, during times of high liquidity and normal market conditions, the spreads can be very narrow. This type of spread is a direct reflection of market supply and demand.

Why do they differ?

The main reason they differ is due to their reaction to market conditions. Fixed spreads don't react to the market, giving traders a consistent spread cost. On the other hand, variable spreads can offer lower costs during normal market conditions but can widen and become more expensive during volatile times.

Example of Good vs. Worse Spreads for EUR/USD:

A good spread for the EUR/USD currency pair might be around 1.4 pips. This means that if the bid price is 1.1000, the ask price would be 1.10014.

A worse spread could be significantly higher, let's say 3.0 pips or more. In this scenario, if the bid price is 1.1000, the ask price would be 1.1003.

Traders always prefer narrower spreads because the cost of entering and exiting a trade is lower. However, it's essential to consider other factors, like the broker's reliability, platform features, and overall trading conditions, when choosing among brokers offering different spreads. This article explains more about this important concept.

Commission: This is the service charge that brokers require for carrying out transactions on behalf of their clients.

Rollover fees: When you leave a trade open overnight, the broker normally charges a rollover fee for the facility of holding your trade open for that period. This is because they assume the risk of the market changing adversely.

Withdrawal and Deposit Fees: Some platforms might charge fees for depositing or withdrawing funds. Pay attention to this. It's important to be aware of these and any associated limits or conditions.

Subscription or Inactivity Fees: Certain platforms have monthly charges or fees for inactive accounts. Ensure you're aware of these potential costs.

Tradable Assets and Instruments

Retail trading offers a diverse range of financial instruments, each with its own set of opportunities and challenges. Even though your main interest might be FOREX, it is always a good idea to know what else is out there for when you want to diversify. Here are the most common tradable assets and instruments:

• FOREX

With the largest trading volume globally, the FOREX market allows traders to speculate on the future movements of currency prices, trading pairs like EUR/USD, GBP/JPY and many more.

• Commodities

Whether it's precious metals like gold and silver, or energy commodities like oil and natural gas, commodities trading offers a chance to profit from the tangible assets that drive global economies.

• CFDs

CFD trading allows you to speculate on the rising or falling prices of fast-moving global financial markets, such as shares, indices, commodities, currencies, and treasuries. You don’t own the underlying asset and you can go short or long. CFD brokers typically provide a wide range of financial instruments across different asset classes, allowing traders to diversify their portfolios with ease.

• Equities or stocks

These represent ownership in a company and constitute one of the most popular avenues for retail traders, given their potential for substantial returns and the thrill of being a part of the corporate world.

• Indices

These are baskets of stocks representing a particular market or sector, like the France 40 or the UK 100 Index, giving traders exposure to broader market movements.

• Cryptocurrencies

Digital coins like Bitcoin, Ethereum and countless altcoins offer both high rewards and volatility.

• Bonds

These debt securities offer periodic interest to holders and return the principal amount at maturity. Bonds are best for those interested in fixed returns.

• Options and Futures

These derivative products allow traders to hedge against potential losses or speculate on price movements without owning the underlying asset.

Payments, Deposits, and Withdrawals in South Africa 

FOREX Trading Customer Service

• Quick resolution of issues
• Educational support
• Assistance with queries during volatile markets
• Account security
• Customized advice (although not all customer service desks offer this)
• Technical assistance
• Regulatory compliance queries

Technical Aspects of the Broker’s Website 

When it comes to sharing sensitive personal information online, such as a credit card, cyber security is paramount. You should, therefore, always look out for SSL certification and two-factor authentication (especially when registering with a new site). Make sure you are using a strong password.

Trading Platforms, Tools, and Features

When choosing a trading platform, you should consider a range of features that cater to both novice and seasoned traders. Here are some elements to keep in mind:

• Shariah-compliant accounts: There is a small but active Islamic trading community in South Africa. If this is you, there should be access to a swap-free account that is consistent with the dictates of Sharia financial law.

• Technical analysis tools: The platform should have robust technical indicators to help traders make informed decisions.

• Customization and user interface: Traders should be able to mold the platform according to their preferences, allowing them to set up their trading environment precisely how they want. We find that the products from the MetaTrader suite, especially MT4, offer excellent features for this purpose.

• Platform accessibility: A top-notch trading platform should offer flexibility in terms of access, whether it's web-based or a downloadable application.

• Risk-management tools: Trading inherently comes with risks, and a high-quality platform should provide instruments that allow traders to set stop-losses, take-profits, and other crucial order types.

• Performance and reliability: Beginner traders especially need a platform that operates seamlessly with minimal downtimes or glitches. This ensures a smooth trading journey, allowing them to focus on market movements rather than technical hiccups.

• Learning and educational resources: The best brokers will offer platforms that are not only intuitive, but also come with tutorials, guides, and responsive customer support to assist traders in navigating any challenges they might face.

To choose the perfect trading platform, here’s some advice:

• Determine your trading style and needs.

• Research different platforms and compare their features.

• Test the platforms with a demo account to see which one suits you best.

• Choose a platform that offers the features you need and is user-friendly.

• Ensure that the platform is reliable and has a good reputation in the industry.

Remember that the trading platform you choose can have a significant impact on your trading success, so it's important to choose wisely.

The classic online trading scam involves criminal syndicates setting up fake online trading platforms that are indistinguishable from those that are genuine. They often have attractive websites with acceptable functionality.
Trading with a scam broker often seems to start off well, with some early gains. Many unsuspecting investors report that they started small, and then invested more, but when the time came to withdraw their funds, they either found their accounts frozen or were advised of some technicality of which they were not aware before. At this point, the online scammer normally disappears and any company contact becomes impossible, 
While this is an old scam that is becoming harder to pull off, scammers are always developing new methods to defraud traders. In fact, many traders lose more money through inside jobs at legitimate traders than through some shady external operator. For this reason, making sure that your broker is regulated by a legitimate regulator is the best way to protect yourself.

Will Your Money Be Protected if Your Broker Becomes Insolvent?

1. The FOREX brokerage firm must not provide price or market expectations (rise/fall);
2. The FOREX firm cannot control your financial dealings (deposit/withdrawal);
3. The FOREX brokerage firm should not “manage” your portfolio under any circumstance.
4. The FOREX brokerage firm cannot grant a client a bonus unless clear terms guide it beforehand.
5. The brokerage firm must not use bank accounts not under its name; and
6. FOREX brokerage firms cannot have or offer the service of account managers.           

According to our research, ICM’s ECN account offers unrivaled low fees for entry level and high-volume traders alike.

The team at Arincen collected more than 120 pieces of data covering more than 100 licensed FOREX companies. Data collection was done in three ways:

1. Companies’ websites.

2. Other websites that have ranked FOREX companies.

   a. survey questionnaire (referred to here as Survey “1”) we had sent to the companies invited to participate in the exercise. We have identified 13 criteria for our assessment, each containing several aspects and carrying its relative weight. These include licensing, deposits and withdrawals, number of assets, etc.
Afterwards, we validated the data by:

1. Registering with FOREX companies as a secret shopper and/or as Arincen.

2. Survey number “2,” in which we asked these companies’ customers for important feedback and experience.

The next step saw us evaluate and rank each company, relying on the demanding work of 15 Arincen employees. We were careful to ensure the most accurate assessment possible, including considering different languages, as well as the various mobile app operating systems, e.g., Apple, Samsung, etc.

To add credibility to our research project, we sent a final and third survey (referred to here as Survey “3”) to enable participating FOREX brokers to evaluate our research and whether it accurately reflects the realities on the ground. We were fortunate enough to receive a mark of 9.9 out of 10! We have kept to a minimum the margin of error, which stood at a measly 1%. To learn more about how we came up with the evaluation, please click here.