CFD Trading in South Africa

cfd wissen newslogo 120x80

The differentiation between the entry and exit point of a trade is represented by CFD or contract for difference. The value of the tradable instrument is dependent on the value of another asset like market index, shares, and commodities. This is basically a contract between the broker and its client. The trader does not own the actual underlying asset. CFD trading in South Africa, as well as rest of the world, has gained in popularity due to its many advantages. The CFD trader will speculate whether the price of the asset will rise or fall. If the market of the asset is bullish then the CFD traders will usually take long positions and short positions when the market is bearish.




Best CFD Broker and Platform in South Africa

*Note: CFDs carry Risk. 73-89% of traders lose​ 
Broker/PlatformWebsiteRegulationMax. LeverageMin DepositDemo
cm trading reviews logo Visit Broker*
CMTrading Review
sa flag
1:200  $ 250 Yes
IQ Option 120x80 Visit Broker*
IQ Option Review

europa flag


$ 10

plus500 120x80 Visit CFD-Provider*
Plus500 Review

Your capital is at risk

FSCA and others 
sa flag

 $ 100

avatrade broker Visit Broker*
Avatrade Review
FSCA and others 
sa flag
1:400  $ 100 Yes
markets 120x80logo Visit Broker* Review
FSCA and others 
sa flag
1:300  $ 100 Yes
bancdeswiss newslogo120x80 Visit Broker*
BDSwiss Review
CySEC and others
europa flag
1:400  $ 100 Yes
markets 120x80logo Visit Broker*
Oinvest Review
sa flag
1:200  $ 100 Yes

How to Trade

As CFDs are leveraged products the South African trader has to only invest a part of the total amount from his own accounts. The traders take a loan from a financial institution (e.g. bank) to invest the rest of the amount. However, there is collateral in the bargain. The trader can lose the money in his trader’s account but also stand to gain larger profits if he is successful. Suppose the ask price for a stock is R 25 and the trader has bought 100 shares. Then, the total amount need to be paid is R 2500. Suppose the traditional broker offered a 50% margin then the trader has to pay R 1250 from his pockets. But, with a CFD broker the margin is a mere 5%. Therefore, the trader can enter the market by investing only R 125.

The South African trader should keep in mind that on entering the CFD trade, the current position will show a loss equivalent to the spread size. Suppose the underlying stock touched the bid price of R 25.5, then, the owned stock can be sold off at a profit of R 50 (R 50/R 1250 = 4% profit). The bid price for CFD may be R 25.25 only. As the trader has to exit the CFD trade at the bid price and the spread in this case is a little larger than the stock market, the CFD traders will have to give up a few budget. The trader may have to buy it at a little higher price. However, this will top up the position for the CFD traders while profit earned from trading in actual stocks (R 50) does not include commissions and other fees. 

The South African trader should go through the following steps when they step into CFD trading:

  • It is essential to first choose the instrument. For this, the trader needs to analyse the historical price action of that instrument.
  • Leverage is the next thing the trader needs to look at. With the help of leverage, the trader can increase the volume of stock, index or commodity contracts for difference at the same amount.
  • The trader has to then enter the trade size. The value of one unit depends on the instrument chosen by the trader.
  • With CFD trading the trader can profit when the price of the instrument goes up as well as when it goes down. It is basically based on the trader’s speculation. So, if the trader thinks that the price will drop then, he will open a “Sell” position (risk warning: in case of unsuccessful trading you will make losses).
  • To minimize the risks the trader should choose from the range of stop-loss orders provided by the broker. The trader can also choose GSLOs or guaranteed stop-loss orders but in most cases it comes with a premium.
  • Suppose the initial price of the instrument was R 50. Let’s say, the price has dropped to R 49. If the CFD trader had bought 400 contracts with an initial investment of R 100 then he will make a profit of R 400.
  • There is no need to set expiry time as CFD positions do not have this feature. 


How to Choose the Right CFD Broker

The CFD traders in South Africa have the option to choose from several currencies (USD, EUR, ZAR, JPY, CAD, and GBP etc.), commodities (gold, silver, oil etc.), stocks (Nike, Google, and Facebook etc.), and indices (NASDAQ, FTSE 500, S&P 500 etc.). To select the ‘right’ CFD broker, the South African trader should visit the following steps:

Reliable or not? The primary step when choosing a CFD broker is to check out whether the broker company is trustworthy or not. One way of doing this is to check out the registration number of the broker and the years of experience it has had. The trader should also go through user reviews.

Offered or missed out? A good CFD broker will usually offer their clients currencies, stocks, indices, and commodities. Treasury CFDs and sector CFDs have also emerged. The trader should also check out whether the brokerage company offers the asset he wants to trade and also the total number of instruments they offer.

What is the trading platform? There are many platforms on which CFD trading can be done. One way of trying out the platform offered by a particular CFD trader is to do demo account trading. The interface of the platform should be user-friendly and should offer a range of stop-loss orders. The broker should make sure there are enough tools to do risk management. Some of the brokers also offer guaranteed stops that have a fee.

Commission or not? Most of the CFD brokers nowadays do not charge any commission or fees for entering or exiting a trade.  The broker company earns its profit from the amount the trader pays for the spread. Wider the spread, the more the trader will lose. Therefore, the trader should look for a brokerage firm that offers tighter spreads. The spreads offered by a broker is usually always fixed. However, the spread may vary a little due to the volatility of the underlying asset.


Regulation (FSB)

For a broker company to operate lawfully in South Africa, it must be authenticated and registered under FSB or Financial Services Board. It has been seen that FSB regulated brokers perform better in the financial market. The main objective of FSB is to add a layer of protection to the investors such as prevent them from losing their money to scams and other such financial malpractices. It also acts as a barrier to unethical companies. Through this FSB plans to create a free and open CFD market system that will operate transparently. If any overseas financial organization wants to provide their services to South African citizens then they must have the permission from FSB. It is for the betterment of the South African financial system.


Demo Accounts

Every CFD trader should try out the demo account provided by CFD brokers in South Africa before actually opening a real account. It is absolutely free. The trader can test a market situation for a particular instrument and will also understand where and when to use risk management tools. A demo account provided by the brokerage websites usually uses real-time data to offer the best demo trading experience to their clients.

Risk Warning: Trading may not be suitable for everyone, so please ensure that you fully understand the risks involved. Especially trading leveraged products such as Forex and CFDs carry a high degree of risk to your capital and can result in the loss of your entire capital. Only invest with money you can afford to lose.