Online Share Trading in South Africa – A Beginner’s Guide
Share trading is the process of buying and selling stocks with the view of making small, but frequent profits. In order to do this from the comfort of your home, you will need to use a South Africa online share trading site. There are heaps of platforms to choose from, so you need to spend some time researching the broker to ensure it meets your needs.
In this beginner’s guide, we discuss the ins and outs of online share trading in South Africa. Not only do we look at the most popular online brokers that allow you to do this, but we also cover the market basics and provide a step-by-step guide on how you can get started today.
How to Trade Shares in South Africa in 3 Quick Steps
Don’t have time to read our guide all of the way through? Below you will find three quick-fire steps to start buying and selling shares right now![three-steps id=”363″]
Step 1: How to Pick an Online Share Trading Platform in South Africa
The only way that you will be able to buy and sell shares in South Africa is by using an online stock trading platform. The good news is that there are dozens of trading platforms that accept South Africans, some of which are regulated by reputable licensing bodies like the FCA and ASIC. With that said, finding a broker that meets your needs can be time-consuming.
To help you out, below we review some of the most popular share trading platforms currently servicing South African residents. Each broker is licensed by a tier-one regulator, supports several local payment methods, and offers thousands of financial instruments that can be traded at the click of a button.
1. eToro – Best Social Platform for Share Trading
Launched in 2006, eToro is now one of the largest online brokers in the space, home to more than 12 million trader. One of the main attractions of eToro is that it allows you to buy shares without paying any dealing charges. This is the case with all 800 shares that the platform lists.
This includes companies based in the UK, US, Germany, Canada, Saudi Arabia, Sweden, and more. If its short-term share trading that you are after, eToro gives you the option of going long or short on your chosen company via CFDs. You will only pay a commission if you keep the position held overnight.
Another notable aspect of eToro is that it allows you to buy shares and be entitled to dividends, and also trade share CFDs (contracts for difference). This means you can choose to go short and speculate on the price of shares going down, as well as apply up to 1:5 leverage for larger trades.
In terms of funding fees, this will depend on the type of market you wish to access, the size of your order, and how much leverage you apply. The good news is that you get to view this in dollars and cents before you place the trade. We should also note that eToro is heavily regulated, with three reputable licenses under its belt. This covers the FCA, CySEC, and Australia.
eToro is also famous as a social trading platform that allows you to engage with over users. In addition, it offers copy trading tools which allow you to mimic the portfolio of any of its 12 million users! This means you can trade shares passively.
This broker has a minimum deposit of $200, which is about 3,400 rands. You can use a South African debit/credit card or e-wallet for an instant deposit, or a local bank account if you are happy to wait a few days for the funds to clear.
- Social and copy trading tools
- Buy shares or trade CFDs
- 0% commission
75% of retail investor accounts lose money when trading CFDs with this provider.
- eToro does not offer a desktop based trading platform
2. Plus500 – Leading Broker with Shares CFDs
Plus500 is a specialist CFD broker that lists thousands of financial instruments. On top of commodities like gold, oil, and gas, indices, cryptocurrencies, and interest rates , you can also trade over 2,000 stock CFDs. Such a large library of shares ensures that you have access to heaps of international exchanges.
This includes major stock markets based in the US, UK, and Japan, as well as less liquid exchanges found in Canada, Hong Kong, and Singapore. In terms of share trading fees, Plus500 does not charge any commissions. Instead, it’s only the spread that you need to take into account. As Plus500 only supports CFDs, you can’t buy actual shares and be entitled to dividends.
You will have access to leverage which is capped at 5:1 when trading shares. You will also have the opportunity to short-sell your chosen company. Getting money into and out of the broker is also fee-free. The platform is regulated on several fronts, including licensing bodies in the UK, Australia, Singapore, and Cyprus.
The broker’s parent company is also listed on the London Stock Exchange as a PLC, so your funds are protected by a range of safeguards. If you like the sound of Plus500, the broker allows you to open an account with just $100, which is about 1,700 rands. Supported payment methods include a South African debit/credit card, bank account, and Paypal.
- 0% commission and tight spreads
- Useful risk management tools
- Low minimum deposit requirement of $100 (1,700 rands)
80.5% of retail investor accounts lose money when trading CFDs with this provider.
- Charges an overnight fee on all positions
- Only offers share CFDs
3. AvaTrade – Best Share Trading Platform for Professional Traders
AvaTrade is an online broker that also specializes exclusively in CFDs. This includes thousands of stocks and shares, as well as energies, hard metals, indices, and cryptocurrencies. The platform accepts traders from over 100 countries, including that of South Africa. As such, AvaTrade is regulated in multiple jurisdictions. This includes a license with regulators in South Africa, Canada, Ireland, Japan, and more.
One of the stand-out selling points of using AvaTrade to buy and sell share CFDs is that it offers super-tight spreads, alongside competitive commissions. Like with Plus500, you can’t buy actual shares when you use AvaTrade.
AvaTrade is also popular with South Africans as it is compatible with a number of advanced trading platforms such as MT4 and MT5. Not only does this allow you to fully customize your trading screen and make use of dozens of technical indicators, but you can also integrate your automated trading robots.
AvaTrade requires a minimum deposit of $100, which you can fund with your local debit or credit card for an instant transaction. You can also deposit funds with your South African bank account, albeit, you’ll need to wait a few days for the funds to arrive. Finally, AvaTrade offers a mobile trading app that allows you to buy and sell share CFDs while on the move.
- Low spreads
- Supports MetaTrader4 and 5
- Mutlipler licenses
- Does not accept e-wallets
- Only offers share CFDs
4. IG – Established Share Trading Platform with Low Fees
IG is a UK-based broker that offers a range of asset classes. Like with eToro, you can buy and sell shares in the traditional manner, or trade them via CFDs. You can also trade shares through the IG spread betting facility. There are a number of platforms to choose from, including MT4, ProRealTime and IG’s own proprietary platform.
Regardless of how you decide to trade your chosen stocks, IG gives you access to more than 10,000 companies, which is one of the largest share collections of all online brokers. This covers most firms listed on the NASDAQ, New York Stock Exchange, and the London Stock Exchange. IG also covers less liquid marketplaces, including that of the Johannesburg Stock Exchange.
Trading fees are also very competitive at IG, albeit, there is a minimum trading fee that you need to be made aware of. This will vary depending on the specific stock exchange you wish to trade. When it comes to spreads at IG, this is generally very competitive when trading major stocks.
If you do opt for IG, the broker requires a minimum deposit of $300, which is about 5,100 rands. The broker is heavily regulated too, so there should be no concerns regarding safety. This includes licenses from the FCA and ASIC, among others.
- Buy shares or trade CFDs
- A variety of trading platforms
- IG guarantees stop orders
- Minimum commissions not suitable for low-level traders
- Less liquid stocks can come with higher commissions
Step 2: Learn How the Online Share Trading Market Works in South Africa
So now that we have discussed some of the most popular share trading platforms that accept South Africans, it is important for us to now explain how the industry actually works. You are going to be depositing and risking your own money, so you need to have a firm grasp of what share trading entails and the associated risks.
What is Share Trading?
In its most basic form, share trading refers to the process of buying and selling shares. Before we go any further, it is important to make the distinction between share ‘trading’ and ‘investing in shares’.
Regarding the latter, this means that you are investing in shares with the view of selling them in a number of months or years. As you own the underlying asset, you will also be entitled to dividends as and when they are paid.
At the other end of the spectrum, share ‘trading’ means that you will be buying and selling stock CFDs. That is to say, you will be looking to make small but frequent gains, and you will have the option to go both long and short on shares without you owning the stocks. Instead, you are simply speculating on the future direction of the company.
Here’s an example of how share trading via CFDs works in practice:
- You think at $300 per share, the value of Apple stocks are heavily overpriced.
- As such, you place a ‘sell order’, which means that you think the price of Apple will go down
- You stake a total of $1,000 on the order
- A few hours later, Apple stocks are now priced at $289 per share
- This represents a loss (or your case, gains) of 3.66%
- You are happy with your profit, so you close the position by placing a ‘buy order’
As per the above example, you made gains of 3.66% on a stake of $1,000, so your total profit is $36.60.
There are a few other points to note about the above example. Firstly, you were able to speculate on the value of Apple shares going down, which is why you placed a sell order. Ordinarily, this isn’t something that you can do when investing in traditional stock, which is why seasoned share traders utilize CFDs.
Secondly, although you speculated on the future direction of Apple stocks, you never actually purchased the shares. Instead, the CFD trading instrument ‘mirrored’ the real-world stock price of Apple. Thirdly, and as we uncover in the next section, seasoned investors based in South Africa will often apple leverage when share trading.
Share Trading With Leverage
In a nutshell, leverage allows you to trade with more than you have in your brokerage account. You are effectively borrowing money from the share trading platform in question, which in turn will come at a cost. Although the exact fee will vary from broker-to-broker and asset-to-asset, it is calculated as a percentage of the amount you borrow.
In most cases, your chosen platform will display your leverage costs in dollars and cents as a ‘per-day’ charge, which is then applied for each day that you keep the position open. Nevertheless, leverage will amplify your profits and losses by a pre-defined multiple.
- Let’s stick with the same example as we discussed earlier, where you placed a sell order on Apple
- You staked $1,000, and you made 3.66% in gains
- Ordinarily, you would have made a profit of $36.60
- However, if you applied leverage of 5x, then this would be amplified to $183 ($36.60 x 5)
With that being said, had you lost 3.66%, then applying leverage of 5x would have amplified your losses from $36.60 to $183. As such, it is crucial that you understand the risks of using leverage when share trading.
What are the Brokerage Fees on South African Share Trading Accounts?
If you want to trade shares with an online broker, you will need to pay fees. Online brokerage fees can vary wildly, as not only can they come in a range of shapes and sizes, but the specific rates will depend on your choice of platform and the asset you want to access.
Below we have listed some of the main fees that South Africa share trading sites typically charge:
- Trading Commission
As the name suggests, this is a commission that is charged by the broker every time you trade. In the vast majority of cases, share trading sites will charge you a variable fee, which is then multiplied by the size of your trade. For example, if your chosen platform charges 0.10% per trade and you stake $1,000, you will pay $1 in commission.
Then, you will pay 0.10% again when you close the position. Be sure to check whether a minimum trading commission applies, as this is something that a lot of share trading brokers implement.
Regardless of which share trading site you sign up with, you will always need to take the spread into account. In its most basic form, the spread is the difference between the buy and sell price of an asset. For example, if the buy price of your chosen stock is $51 and the sell price is $50.50, then this gap in pricing amounts to just under 1%.
As a result, you will need to make gains of at least 1% just to break even. Ultimately, the smaller/tighter the spread is, the less that you are indirectly paying in fees.
- Overnight Financing Fees
Overnight financing refers to the fees that you pay when you apply leverage to your share trades. As we briefly covered earlier, this is calculated as an annual interest rate, which is then paid on each day that you keep the position open.
- Non-Trading Fees
Outside of the above, you also need to check what non-trading fees the share trading platform charges. This includes deposit and withdrawals fees, currency conversion fees, and inactivity fees.
What are the Share Trading Terminologies for Beginners?
If you’re yet to trade shares at an online broker, then you are likely to see a range of terms that you might not have previously come across. While covering each and every term is beyond the remit of this guide, below you will find some of the most prominent.
- CFDs: Contracts-for-Differences, or simply CFDs, are what you will be utilizing when trading stocks and shares. In a nutshell, CFDs track the real-world price of an asset, meaning that you can trade it without taking ownership. For example, if the price of Nike stocks goes up by 4% on the New York Stock Exchange, as will the CFD.
- Buy and Sell Orders: When you trade shares online, you will always need to place either a buy or sell order. A buy order is placed when you think the price of the shares will increase, and a sell order when you think the opposite. All trades will require both orders. For example, if you open with a buy order, then you will close the position with a sell order and vice-versa.
- Stop-Loss Orders: Stop-loss orders ensure that you do not lose more than you intended. They will close an open position when the shares hit a certain price. For example, if you want to short-sell IBM stocks but you don’t want to lose more than 2.5%, then you ensure that your stop-loss order closes the position if it goes in the red by 2.5%
- Take-Profit Orders: This works much like a stop-loss order, but in reverse. For example, let’s suppose that you are trading Amazon shares and you want to close the position automatically when you are 3% in profit. As soon as your pre-defined price is hit, the order will be closed on your behalf.
- Liquidated: This particular term is one that we hope you never experience, but it’s crucially to understand nonetheless. So, when you apply leverage to your trade, you are required to put up a margin, which is like a security deposit. For example, if you apply leverage of 5x, then you will need to put up 20% of the total trade size (1/5 = 20%). If the value of your leverage order then goes against you by 20% or more, your trade will be ‘liquidated’. In simple terms, this means that your trade will be closed and the broker will keep your margin.
- Margin Call: Following on from the above point, the broker will send you a ‘margin call’ when you are approaching the liquidation price. This is essentially a notification that lets you know you are close to being liquidated. At this point, you can either add more funds to your margin balance or do nothing and hope for the best.
What are the Best Tips When Trading Shares?
Make no mistake about it, trading shares is not something that you can simply learn overnight. On the contrary, you will need to dedicate many months, if not years to your online trading endeavors if you want to be successful. In doing so, you’ll arm yourself with the necessary tools to make a success of it.
To help you along the way, here are five handy tips that will ensure you get your share trading career off on the right foot.
1. Consider Using a Demo Account
First and foremost, if you are going into online share trading in the dark, it might be worth starting off with a demo account. Several online brokerage platforms offer such a facility, so you’ll get to buy and sell shares without risking any money. This is known as ‘paper trading’.
The best thing about it is that you will still be trading in live market conditions. In other words, as the real-world share price of the company goes up and down, as will your demo account facility.
2. Move on to Small Stakes
Once you get comfortable with a demo trading facility, it is advisable to then move on to smaller real-world stakes. After all, you don’t want to blow your entire account balance on the first day (you would be surprised how common this is with newbie traders).
Instead, by taking a slow and steady approach, you will begin to learn the ins and outs of bankroll management. Crucially, you will also prepare yourself for the emotional side of trading, insofar that you learn how to take losing trades on the chin.
3. Avoid Leverage
On top of starting with smaller stakes, we would strongly suggest that you refrain from applying leverage until you begin building a consistent record of making gains. While it can be tempting to amplify your stakes to chase those large wins, leverage can do the same for your losing trades.
As such, leverage is best left to those that have a good amount of trading experience under their belt.
4. Stick With Large-Cap Stocks
Some of the brokers that we have discussed in this guide – such as IG and Plus500 – gives you access to thousands of shares. While this will include major companies such as IBM, Disney, British American Tobacco, Ford, Amazon and many others, you will also be able to trade smaller-cap firms.
The main problem with this is that smaller companies suffer from lower levels of liquidity, which in turn, means that they are much more volatile. This can be highly consequential as a newbie trader, which is why we would suggest sticking with large-cap stocks. In particular, this includes major stock exchanges in New York and London.
5. Learn Technical Analysis
Finally, and perhaps most importantly, you must learn the ins and outs of technical analysis. Without it, you simply won’t be able to trade shares and make a profit in the long run. For those unaware, technical analysis is the process of reading charts on a stock.
In particular, you will be looking for pricing trends that are forming, and how these trends might influence the future direction of the stock. Technical analysis requires the utilization of ‘technical indicators’, of which there are over 100. Each indicator looks at a specific metric, such as volatility, volume, and market sentiment.
What Risks are Involved with Share Trading in South Africa?
It can be easy to go into the online share trading space without making considerations for the risks. However, this is something that you need to factor in, as there is every chance that you could lose money.
In fact, the vast majority of newbie traders lose money at the first time of trying, which is why you need to understand how stop-loss orders and other risk management tools function.
Additionally, you also need to look at the broader risks of using an online broker. After all, you will be depositing funds and entrusting your account balance with the provider, so you need to make sure that you are protected.
At the forefront of this is using a broker that holds one or more licenses. For example, the likes of eToro is licensed with the FCA, ASIC, and CySEC, meaning that your funds are held in segregated bank accounts.
Step 3: Choose an Online Share Trading Strategy
The next step that you need to consider is that of your share trading strategy. Crucially, there are heaps of different ways to trade shares online. What works for one trader might not necessarily work for the next, so spend some time looking into the following strategies before taking the plunge:
- Day Trading: As the name suggests, day trading means that you will be actively buying and selling shares on a day-to-day basis. More specifically, you will be opening and closing several positions throughout the trading day, and rarely will you hold a trade open overnight. Instead, you will be looking to scrape smaller gains. As such, most day traders typically keep a share trading position open for a number of minutes or hours at most.
- Swing Trading: Swing trading is all about catching the trend that the share in question is moving in. As such. you might keep your position open for a number of days or weeks, but rarely more than a couple of months. For example, let’s suppose that’s IBM releases its latest earnings report, which is much better than the markets expected. Knowing that the value of IBM shares is likely to increase in the short-to-medium term, swing traders would look to stay with the trend until there is a market correction.
- Position Trading: More commonly referred to as a ‘buy and hold’ strategy, position trading means that you are investing in a stock for a longer period of time. In fact, you will likely sit on the stocks for at least a few months and maybe even years. This isn’t ‘share trading’ per-say, but more aligned with ‘stock investing’. That is to say, position trading is more congruent with buying shares in the traditional sense, as you won’t be charged overnight financing fees, and you will benefit from dividends.
- Scalping: Scalping is an advanced trading strategy that seeks to make ultra-small gains when a share is trading within a tight range. For example, let’s suppose that Ford Motors has been trading between $5.50 and $6 for a period of two weeks. During this period, the scalping trader will look to profit every time the shares move up and down. They will place sensible buy and sell orders between the range, subsequently making gains for as long as the consolidation period remains in place.
Step 4: Open a Shares Trade
So now that you know the ins and outs of what share trading in South Africa entails, as well as the risks that you need to consider, we are now going to guide you through the process of placing a trade. This covers the process of depositing funds, uploading your ID, depositing funds, and then placing your first buy or sell order.
Create an Account and Verify your Identity
First and foremost, you will need to visit your chosen broker and elect to open an account. In this walkthrough, we are showing you the process with regulated share trading platform eToro, which is popular with newbie investors in South Africa.
Once you click on the ‘CREATE ACCOUNT’ button you will need to enter a range of personal information, such as your:
- Full Name
- Home Address
- Date of Birth
- South Africa Tax Identification Number
- Employment Status
- Net Income
- Net Assets
- Contact Details
As we discussed earlier in our guide, eToro is licensed by three tier-one bodies (ASIC, FCA, CySEC). This means that you will now be asked to upload a couple of identification documents.
- Government-issued ID such as your South Africa passport or driver’s license
- Proof of residency via a utility bill or recent bank account statement
You can take a picture with your mobile phone if the quality of the camera is sufficient. eToro will usually verify the documents in a few minutes.
Once you have uploaded your ID, you will then be asked to deposit some funds. eToro supports several South African payment methods, such as:
- Debit Cards
- Credit Cards
- Bank Wire
Although the broker allows you to deposit funds in rands, this will be converted to US dollars. In doing so, you will have access to over 800 shares across heaps of international stock exchanges. This will, however, attract a small 0.5% conversion fee.
Finally, once your account has been funded you can then place your first shares trade. By clicking on the ‘TRADE MARKETS’ button, followed by ‘STOCKS’, you will get to browse through the many different exchanges that eToro supports. In our example, we know that we want to trade Microsoft stocks, so we enter the name of the company into the search box and click on ‘TRADE’.
Here’s what you need to do to get your shares trade placed:
- Buy/Sell: As we discussed earlier, place either a buy (long) or sell (short) order to determine which way you think the shares will go. As per the above, we are placing a buy order, meaning we think the value of Microsoft shares will increase.
- Stake: This is where you need to enter the size of your stake in US dollars. Minimum trades start at $50 (unless you are applying leverage).
- Leverage: If you want to trade with leverage, eToro permits up to 5x on shares. If not, leave this set at 1x.
- Stop-Loss: Enter the price that you want your stop-loss order to trigger
- Take-Profit: Enter the price that you want your take-profit order to trigger
Once you confirm the buy/sell order, your trade will be executed within a few seconds!
Pros and Cons of Shares Trading
- Trade shares from the comfort of your home or via your mobile device
- Choose whether you want to go long or short on your chosen stock
- Spreads, commissions, and fees are now super-competitive
- Trade thousands of companies across several stock exchanges
- Lots of regulated platforms accept South African traders
- You can easily deposit and withdraw funds with a local debit/credit card or bank account
- Most newbie share traders lose money
- You will need to dedicate lots of time to learn technical analysis
In summary, online share trading is getting more and more popular with South Africans. Much of this increased demand is due to the ease in which you can get started. As we have discussed, you simply need to choose an online broker that accepts South Africans, deposit some funds with your debit/credit card or bank account, and then start buying and selling shares.
If you think you have what it takes to start trading shares today and you have a firm grasp of the underlying risks, we recommend eToro as the best place to start. With 0% commission, the chance to buy shares or trade CFDs, and innovative copy trading tools, eToro ticks every box.
eToro: Best Share Trading Platform in South Africa
75% of retail investor accounts lose money when trading CFDs with this provider.
- Buy 800+ shares or trade CFDs
- 0% commission
- Social and copy trading tools
- Strictly regulated
To ensure we bring you the most reliable and accurate information possible, our writers use primary sources to support their content. These include studies, government resources and commentary from industry experts.
Financial Conduct Authority (FCA) “Client Money and Assets, https://www.fca.org.uk/firms/client-money-assets“, Accessed June 15, 2020.
Johannesburg Stock Exchange (JSE). “Market Regulation, https://www.jse.co.za/services/market-regulation“, Accessed June 15, 2020.
What stock markets can I trade in South Africa?This depends on the share trading site that you sign up with. For example, eToro covers over a dozen exchanges. This includes companies based in the US, UK, Canada, Japan, and more. If you want to access companies on the Johannesburg Stock Exchange, IG is worth considering.
How much does it cost to trade shares in South Africa?Most, but not all, share trading brokers will charge you a commission. This is often a percentage that is multiplied against the size of your stake (including leverage). Some brokers will also install a minimum commission charge, so be aware of this. In other cases, brokers like eToro and Plus500 charge no trading commissions at all.
What is the difference between stocks and shares?By holding 'stock' in a company, this means that you own a percentage of equity in the form of shares. When it comes to 'shares', this simply relates to the number of individual shares that you hold in the company. For example, if the value of the firm is $10 per stock, and you invest $70, then you own 7 shares!
Can South Africans buy shares with leverage?Yes, South Africans have access to leverage facilities, which is something that the vast majority of CFD brokers offer.