Are you planning to venture into trade in South Africa? Well, here is a complete guide for you to read and understand before you dive into the trading business.
As a starter, you’ll probably find trading to be overwhelming. You’ll get to learn so much about different charts, instruments, and indicators. This amount of knowledge can leave you hopeless or even confused.
If you’re a beginner, you have to remember that the most prominent traders once had a starting point. You too can manage to reach their level.
To assist you in reaching that level, we’ve analyzed the top trading terms that every trader should know before venturing into the trade market. We’ve combined some of these terms since they tend to be termed together or are opposites. Paring them up simplifies the understanding of their trading role.
Trade in South Africa
South Africa is a vast and economical country with lots of traders. This makes the trading competition in this country high.
But with this insightful information, you can reach greater heights in the South African trade market. Keep this information at your fingertips and try to put them in practice.
Quickly, let’s jump into discussing these trading terms.
The direction of the market’s price movement is what is known as the trend. You can identify a trend by price action or trendlines that show when the price is on the lower swing highs and lower swing lows for a downtrend or higher swing lows and higher swing highs for an uptrend.
Several traders choose to trade in a similar direction as a trend. But contrarians usually detect the trade or reversals against the trend. Downtrends and uptrends are seen in all markets, such as bonds, futures, and stocks.
They’re also noted in data. For instance, when monthly economic data falls or increases each month steadily. The period when the prices fall is known as the bearish trend or bear market.
On the other hand, when the prices rise, the period is referred to as a bullish trend or bull market.
There must be a seller and a buyer for a trade to take place. This term refers to a double-way price quotation indicating the best selling and buying price of a security at a specific time.
The maximum price that the client is offered for security is known as the bid price. On the other hand, the asking price is the lowest price that the seller is will receive. The trade occurs when both settle down on the same price for the security.
The spread is the difference between the bids and asks price. It is also the primary indicator of the asset’s liquidity. In simple words, the quality is better with a smaller spread. You will be charged a spread by most brokers if you get into business with them.
Here, opening and closing positions are employed on the same day as a strategy. Day traders usually opt to close their positions in the evening and reopening them in the next day. They don’t have positions held overnight.
Instead of a longer-term market movement, day trading is a short-term strategy that gains from smaller, intra-day price fluctuations.
Unlike traditional investors who buy low, hold, and then sell high, day traders think differently. They focus on the price of the asset in contrast to its long term potential.
This is the reason as to why the strategies of day trading focus on several technical analysis and need the trader to be aware of the latest news that might cause fluctuations in the market.
In trading, the tag of war between the marketers and the buyers occurs at residence and support levels. This is an essential level where the pressure of selling prevents an increase in the prices.
On the other hand, support steps to prevent a decrease in prices.
As a trader, you should monitor resistance and support levels to find possible entry and exit points.
A price might either back off from its level or break through to the next level when it reaches a support or resistance level.
A company that looks after impressing its shareholders comes up with a report. This report is known as an annual report. It holds all the company’s information from its cash flow to its management skills.
You’ll get to judge a company’s financial situation and solvency when you read their manual report.
The report’s front page displays an excellent graphics combination, pictures, and associated narratives. All of this narrates the activities of the company over the previous year.
The back page of the report details the operational and financial information.
Leverage involves borrowing funds from a broker to raise profit. With leverage, you can earn a higher profit by trading with more funds than you have. However, you may face serious loses from unsuccessful trades.
We advise that you use leverage with discretion.
Indicators are tools used to analyze the conditions of the market and assist in finding entry and exit points for a trade.
There exist different types of indicators which assist in analyzing various factors such as volatility, momentum, volume, and trend.
We recommend that you don’t rely on one indicator. Instead, you should combine them.
Nonetheless, it’s up to you to analyze this information and come up with a trading decision accordingly. However, you should be cautious and monitor false signals.
Volatility is how much and how often price changes. The price constantly fluctuates for a highly volatile asset. This mostly occurs with extreme highs and lows.
On the one hand, traders gain from spikes and dips from high volatility. On the other hand, there is always a risk of losing trade since the price movement may be unpredictable.
End Note on Trading Terms
This list is short, but it’s a great place, to begin with. Yes, the trading world is crowded with complex terms, but taking it to step by step might increase your understanding little by little. After reading this guide, you can begin to trade in South Africa.
Please explore the other parts of our blog for fascinating information about the trade or give us a call today.