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Online trading has grown exponentially during and post-Covid-19 as more and more people looked for ways of making additional income in global markets and financial instruments such as bonds, cryptocurrency, stock indices and forex.
Today the local industry is worth about $1 billion per annum and is growing, according to Kamogelo Mosime, partnership manager at Tickmill, an award-winning forex, stock, commodities and bonds broker. Mosime said online trading provides ordinary South Africans an opportunity to participate in financial markets using instruments such as bonds, cryptocurrency, stock indices and forex, even with limited resources. This is a big game changer for African economies.
The widespread use of smartphones and mobile devices in South Africa has fueled the popularity of online trading. Anyone can trade as long as they have internet connection. They can do research and equip themselves with knowledge and understanding of how the market works which ultimately will save consumers money and tears.
Mosime says while the beginners may struggle to navigate trading intricacies at first there is help on offer.
"You don't even have to start with real funds. We offer demo accounts where you can trade real time with real traders with fake money essentially. And this kind of teaches you the ins and outs, how trading platforms accounts and markets move, on how information is received and how to apply that information. That is my go-to in terms of how somebody can upskill themselves by actually being in the market, using a tech account and getting familiarity with the platform and once they feel that they're ready to bring money into the market then they can do so.
READ: Trading requires time, not expensive training
"We provide webinars that are prerecorded and uploaded on the website. We provide a lot of tools where, in the comfort of your own home, you basically can play around with different tools and different trading strategies. And you can see those resources gaining popularity in your trading, especially among the average household consumer."
Many consumers have fallen victim to the allure and dreams sold by so-called forex traders who in some cases take people's money after promising them outrageous returns in a short time.
Mosime cautioned that while there was a lot of money to be made from trading it does not happen overnight, it takes time, diligence and commitment to enjoy those returns at a later stage. He said:
"The reality couldn't be any more different. Trading, just like anything else, requires discipline. It requires patience and it requires time. There are people with those characteristics who are consistently making money trading off because they understand the ins and outs and the complexities and the risks involved in trading. What I will urge people to do is, if you are seeing these influencers on social media, make sure you do research and your own due diligence."
He said: "These personalities are putting a dampening perception on how trading works. Trading is not necessarily something that only educated people can undertake. It's meant to be something that you enjoy and you upskill yourself. Just like with any other skill, you become a master at that skill. Once you become a master at that trade you become profitable.
"But if you're going to be looking at influencers online who use trading as their bread and butter and communicate theories [you'll have difficulties.] Do your research and make sure you really understand how it is that people are really making money.
He said trading platforms such as EasyEquities, can be useful as a training tool when starting out and have contributed to the growth of this money making pastime. But the more advanced you become as a trader you might need more specialized assistance to drill down into the complexities of online trading.
Mosime said a lack of knowledge and being emotional when making investment decisions were some of the pitfalls for novice traders. "If you don't have a solid understanding of market strategies, risk management tactics, a beginner will struggle to navigate the complexities of trading. Excitement can lead to irrational decision making. An emotional trader will take losses they'll hold on to leading conditions and profitable trades prematurely. So it's very important to manage your emotions in trading.
"If you're too impatient and impulsive, you can deviate from your well-thought out strategy, you need to keep a trading journal, because when you journalize your trades you keep yourself accountable and you don't act on spare of the moment impulses."
Another mistake people tend to make is over trading Mosime pointed out: "If you don't have a proper plan, this all results in higher transaction costs, increase exposure to market risks. So you know you want to watch for the trading, you want to know when it's a good time to enter and exit the market. So you need to have that well defined before you enter the market.
"If you don't have a clear and defined trading plan, you don't have a roadmap and this will make it difficult for you to stay focused and you have no kind of benchmark for yourself to hold yourself accountable."
