How To Trade CFDs In South Africa

Below is How To Trade CFDs In South Africa

CFD trading in South Africa has become increasingly popular. In fact, CFDs are challenging single stock futures in terms of activity on the Johannesburg Stock Exchange (JSE). This means there is a growing number of firms and platforms for traders to choose from. Here we’ll run through some of the best, as well as explaining the tax implications of CFD trading in South Africa.

How Does CFD Trading Work?

Firstly, what are CFDs and how do they work? A CFD, which stands for contract for difference, is a tradable derivative instrument that allows speculation on the price movement of an asset without owning the underlying security. CFDs are available on stock market indices, forex, commodities, cryptocurrencies, futures, options, and more.

CFD trading is legal in South Africa. The country’s Financial Services Board (FSB) oversees CFD and forex trading.

In addition, many established companies dealing with CFDs in South Africa are regulated by other reputable bodies, including the Cyprus Securities and Exchange Commission (CySEC) and the UK Financial Conduct Authority (FCA).

As a result, traders in South Africa could benefit from the legal protection of several trusted bodies.

CFDs Vs Single Stock Futures

Single stock futures (SSFs) contracts are similar to CFDs and hugely popular in South Africa.

With that said, there are some important distinctions. Firstly, CFDs do not expire, whereas single stock futures do and they incur a rollover fee if you still hold them at expiry. With CFD investments you get one CFD per contract, single stock futures, on the other hand, are 100 shares per contract. Also, equity CFDs do not incur dividend exposure, unlike single stock futures.

How to Choose a Brokerage

The best CFD trading brokerages in South Africa offer competitive fees, and easy account opening process, and an intuitive platform.

XTB is a particularly popular option among traders in South Africa – promising low CFD stock fees, plus prompt deposits and withdrawals.

Another prominent player in South Africa is XM, which offers a simple market maker account, a direct market access account, and a hybrid option.

City Index and IG also offer competitive fees, excellent educational tools, and a social trading environment.

How can I trade online CFDs?

Choose a market. Decide which market you want to trade on.

Decide to buy or sell. Click ‘buy if you think the price will increase in value or ‘sell’ if you think the market will fall in value.

Select your trade size. Choose how many CFDs you want to trade.

Add a stop loss.

Monitor and close your trade.