After Nigeria, South Africa has Africa’s second-largest economy. A global shift away from the dollar might also provide South Africa an important role, as it would help developing countries get access to new economic opportunities and methods of exchanging their currency.
Additionally, the South African Rand, the continent’s largest traded currency, warrants more consideration.
In this post, we’ll go through the ins and outs of trading South African Rand, including the pros and cons, and many scenarios that are theoretically feasible.
Trading possibilities of the South African Rand
When forex trading South Africa, traders might use a variety of tactics. Trading opportunities can be found by either discretionary price action analysis or backtesting to develop a rules-based system.
Using the popular MetaTrader 5 platform, traders have access to a plethora of technical indicators provided by their Forex broker, allowing them to develop profitable rule-based trading systems.
For instance, crossovers can be traded using two moving averages.
It might be construed as bullish if the 50-day moving average rises above the 200-day moving average. A person’s risk tolerance should be taken into account before making any form of trade involving a financial asset, and this is just one example among many.
Traders could also examine a group of moving averages to identify periods of convergence and sideways price action.
After this period of minimal volatility, a significant breakout or breakdown is possible when forex trading South Africa.
Trading the USD/ZAR currency pair
The South African Rand is denoted by the symbol ZAR and can be exchanged for a variety of other currencies. When someone quotes a USD/ZAR rate, they are effectively telling you how many ZAR are required to buy one USD.
The USD is the base currency in the USD/ZAR pair, and the ZAR is the quote currency. In fact, any currency transaction involves the exchange of two currencies. You could, for example, trade the USD/ZAR, EUR/ZAR, GBP/ZAR, and so on.
With a EUR/ZAR conversion rate of 20, you would need 20 ZAR to buy one Euro. Because the ZAR pairs are ratios, you can go long or short on the ratio.
For example, if you are long USD/ZAR, it means you expect the US dollar will strengthen against the ZAR. It indicates that in the future, more ZAR will be required to purchase one USD.
If you are short USD/ZAR, it suggests you believe the ZAR will strengthen versus the dollar. The USD/ZAR ratio will fall if the ZAR strengthens or the USD weakens.
Going long on USD/ZAR means buying dollars using ZAR, while going short on USD/ZAR involves selling dollars.
Traders could also consider a collection of moving averages and notice phases in which the majority of the averages converge and the price moves sideways. This low volatility period could be followed by a significant breakout or crash.
The South African Rand can be traded using CFDs (Contracts for Difference) through a reputable and licenced broker; you can trade ZAR against EUR, USD, GBP, and other currencies.
There are numerous ways to trade in South Africa, but not all of them will apply to every particular dealer. Trading numerous financial assets related to South Africa is achievable through an authorised and reputed online broker.