Trading stocks in South Africa – Where To Start

Home » Trading stocks in South Africa – Where To Start

If you are considering trading stocks in South Africa, then you are not alone, as the number of incoming traders has continued to increase in recent years. The recent boom that was driven during Covid lockdown periods, and meme stock trading was a rather global phenomena that pushed forward a lot of demand for stock trading worldwide, with South Africa no exception.

trading stocks in south africa

Changing audience for trading stocks in South Africa

Whilst the stock market has historically been for the buy and hold, long-term, inclined; the increase of online CFD trading platforms in South Africa has grown the number of us that engage in trading stocks as derivatives (think CFDs, futures, or options).

To ensure that you make the most out of your experience when stock trading in South Africa, we have put together 10 tips to consider before diving in:

1. Research the company before investing in their stock.

Adequate research of a companies fundamentals includes understanding their financial statements, management team, and industry competition. There are some guides out there that help you in understanding the differences between various stock valuation methods, and using these to look for undervalued stocks is a great way to begin trading stocks in South Africa, either with local, or International companies.

2. Set a clear investment strategy and stick to it.

Whether it is for long-term growth or short-term profits, you need to have a very clear strategy that dictates what you will do, and when. This will help you in making decisions and not getting swayed by emotions during times of market volatility.

3. Diversify your portfolio.

Diversification is a key tool you have at your disposal to reduce risk. Keeping your trades, or position sizes to an appropriate maximum of your portfolio helps you avoid relying on one or a few stocks. Those who are overexposed to one position can find themselves with significant losses if they underperform.

4. Have a trading diary.

Keep track of your trades regularly, and make adjustments if necessary to align with your overall strategy. This includes monitoring the performance of each stock and any news or announcements related to them.

5. Understand South African stock trading tax laws!

Be aware of South Africa’s tax laws regarding capital gains and dividends, as well as any other regulations that may affect your trading activities.

6. Use custom order types.

Consider using limit orders instead of market orders when buying or selling stocks, as this helps you specify the price at which you are willing to transact.

7. Keep your risk close.

Use stop-loss orders to limit any potential losses on a stock, as it automatically sells the stock when it reaches a certain price point.

8. Use external resources.

Seek advice from a qualified financial advisor if needed, especially for more complex investment activities such as options trading. You can also find various communities of others undertaking stock trading in South Africa so that you do not have to go it alone. Be careful who you trust, but don’t trade in a bubble.

9. Absorb as much information as you can.

Stay updated on market news and macroeconomic events that may affect your investments, both in South Africa and internationally. This includes keeping track of economic indicators, political developments, and central bank policies.

10. Keep a clear head.

Stay patient and disciplined with your investing approach, as rushing into trades or panicking during market downturns can lead to poor decisions and losses in the long run. It is also important to not get caught up in the hype of hot stocks or news stories, as these may not necessarily translate into profitable investments.

Tips For Trading Stocks In South Africa Summary

No list of 10 tips will give you all you need to know about succesfully trading stocks, but it is certainly a useful exercise to think about, and plan for how to go about making a stock trading plan in advance of entering the markets.

If you follow a mantra of ‘more knowledge is better’ then you can use these tips to help you as you start building a strategy for the types of stocks you trade, and the way you trade them. Know the companies you are planning to trade, understand the fundamental and technical analysis that could have implications on your trade, and always have a plan for when to enter and exit the market.

Just remember, even the most successful traders experience losses – but by being strategic and disciplined in your approach, you can minimise the losses when they do occur and maximise your gains just the same.