South Africans seeking to diversify their investment portfolios and gain greater financial independence are increasingly turning to forex trading as a viable primary or secondary income stream.
Forex trading is hugely popular in South Africa, with an estimated 80 000 to 100 000 monthly traders.
Driven by currency volatility, slow economic growth and rising inflation, many South Africans are turning to forex trading as a source of secondary or even primary income.
Local conditions are favourable to traders, as a sophisticated financial system, healthy regulatory oversight and secure trading environment create a compelling proposition to people seeking greater financial freedom and security.
In support of the growing number of South Africans engaging in forex trading, Octa – a global forex broker providing online trading services worldwide since 2011 – has compiled a shortlist of five essential trading tips.
Whether you’re new to trading or looking to refine your strategy in 2024, the following tips should elevate your trading and help you achieve better results:
Trading Tip 1: Focus on Fundamentals
Successful trading is built on the twin pillars of sound fundamental and technical analysis.
Fundamental analysis aims to understand the underlying forces that are driving market prices. It looks at an investment asset’s related economic, financial and regulatory factors, ranging from GDP growth and interest rates to unemployment and inflation.
Since the contributing factors in a currency pair are limited, successful forex traders use fundamental analysis to inform their trading choices and boost their investment outcomes.
Trading Tip 2: Go Technical
Another vital aspect is to develop a sound understanding of the technical elements associated with successful trading. Technical analysis looks at historic price movements and trading volumes and uses that understanding to forecast future market behaviour.
Technical analysis assumes that past trading activity can help predict future trades. Technical traders – often equipped with charts and statistical indicators – apply this form of analysis to enhance their trading strategies with real-world data insights.
However, due to the sheer number of potentially applicable indicators and patterns, technical analysis can be daunting to new traders. Trading platforms such as Octa provide dedicated analytical toolkits to feed expert insights to traders, who use the insights to improve their decision-making and save time on research.
Trading Tip 3: Diversify Your Portfolio
Flexibility and adaptability are the hallmarks of successful trading. Experienced traders will fine-tune their strategies by putting less successful assets on hold and doubling down on the ones that are showing profit. This smart approach ensures traders show a profit regardless of the prevailing market conditions.
By diversifying your portfolio, you can mitigate your risks and unlock the potential for greater returns. Build towards a mix of currencies, commodities and other tradable instruments to reduce the impact of a downturn in one asset or region. This also helps you capitalise better on positive market movements and opportunities, delivering greater long-term results.
Trading Tip 4: Stay Secure
Security is the bedrock of modern financial freedom and essential to keeping your earnings and investments safe. With scams, fraud and cyber threats rising worldwide, traders need to take a proactive approach to securing their funds.
Don’t be swayed by the lure of murky promotions and unverified second-party channels, or so-called ‘gurus’ and ‘influencers’.
Rather, choose an experienced broker with a long and successful track record that offer segregated accounts – in other words, don’t work with a broker that uses your funds for their own operational purposes. In addition, seek a broker with good-quality customer service to ensure you have the support you need, when you need it.
Trading Tip 5: Luck Is Not A Strategy
Forex trading success depends on strategy, not luck. If you rely on intuition alone, you won’t have the objectivity to make adjustments to your trading decisions, leaving you to the whims of the market.
Rather, develop a strategy that turns your trading into a consistent source of supplementary income. Start by choosing an appropriate timeframe, picking assets that match your financial goals, and setting criteria for opening and closing orders. A sound strategy turns chaos into order, paving the way to your trading success.