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How to Choose the Best Currency and Stock Broker in South Africa

Choosing the best brokers in South Africa requires some thought. As an individual trader, you can’t access the global currency market by yourself. The currency market is virtual. It isn’t tied to a physical location. 

Instead, the market is formed by a worldwide network of computers, which connect the liquidity providers, the big banks, the currency  brokers and the traders. To gain access to this market, you will need to use specialised software. You will also need a clearinghouse for your currency transactions. This is where currency brokers come in.

Currency brokers handle the funds on behalf of the traders by warehousing these funds within their accounts, and they provide the software which enables them to put on these trades to buy or sell currencies. 

When it comes to CFD share trading, the brokers act as market makers, setting up execution and settlement in-house using the prices of the stocks in the underlying national exchanges. So you can see that there's nothing you can do to trade currency pairs or to trade share CFDs without the brokers. So, if you want to deal with the top stockbrokers in South Africa, you have to choose the best one for your particular needs. 

There's a lot that can go wrong at this stage. There have been stories of brokers with questionable regulation disappearing with the funds of their clients. There have also been cases where certain market events caused brokers to shut down suddenly and go into administration. Even though funds are usually safe in instances where regulators take over brokerages and send them into administration, it could take a while to retrieve your funds. There is what is called time value for money. In the time it takes to get back your funds from bankrupt brokerage houses (which could take years), that money could have been used elsewhere to generate returns.

Your best bet is to ensure that you select the currency brokers in South Africa that give you the best conditions for your trading and safeguard your funds from the get-go. That way, you don't have to lose these funds in the first place or have them tied up in administration processes.

Things to Consider When Choosing a Broker

It’s wrong to assume that every currency  broker is a scam. Some brokerages may have scam-free operations but may have specific practices which jeopardise the safety of their clients' funds. That is why merely checking to see if a broker is a scam or not is not the right way of selecting a broker. There are specific metrics you can use for a more objective evaluation.

These metrics for currency broker selection are designed to encapsulate the essential aspects of currency brokerage operations as it affects the trader directly. 


Choose a Broker That Ringfences Clients' Funds

Account segregation, or ringfencing, is a mandatory requirement in many jurisdictions. This factor makes the difference between protection of clients' funds in the face of insolvency or total loss of such funds. Ringfencing means that the brokerage firm will keep all funds belonging to clients in a bank account with a designated bank, separate from the bank account(s) which hold the operational funds of the brokerage.

This requirement saved many traders' funds when the Swiss National Bank's January 2015 de-pegging of the Euro from the Swiss Franc led to the insolvency of at least two major brokerages. You should be able to get this information in clear terms from the brokerage you want to use.




Regulation means that the currency broker is registered and licensed by the country's financial market regulators to handle, process, clear and conduct settlement of funds belonging to traders. You don’t have direct access to the market. You have to use a broker to do this. How else can you guarantee that the broker will not disappear with your funds if not through the process of regulation?

Several processes are invloved in regulating brokerages, for instance that the firm has to have registered industry professionals as part of their managerial team. Even staff have to possess some industry-level qualifications, without which they cannot work in those industries. When a professional knows that his livelihood can be challenged if he or she engages in corrupt practices, it makes them extra careful and sensitive when dealing with funds of clients.

Regulation ensures that brokers abide by a code of conduct which leads to transparency and integrity when dealing with clients' funds. There are strict penalties for any infringements. In other words, regulation builds a system of accountability which ensures the integrity of the financial market systems.

In South Africa, the Financial Sector Conduct Authority (FSCA) mandates all currency brokers as well as the top stockbrokers in South Africa to place their regulatory information (license number, etc.) on the home page of their websites. The brokerage operations of ThinkMarkets in South Africa is operated by TF Global Markets (South Africa) Pty Ltd. The regulatory information is displayed at the bottom of the home page, as shown below.

Regulator on the South African webpage footer

This is in keeping with the requirements of the regulator in South Africa. It immediately tells you at a glance that you are dealing with a licensed operator and not a bucket shop. It also means that all privileges and rights that a trader has by working with a regulated entity in the brokerage business will be fully delivered.


What is the Track Record of the Broker?

Choosing the best currency or stockbroker in South Africa doesn’t end with just regulation. A broker can be well regulated and do everything by the book, but may have some issues that affect the entire experience. Trading is not all about placing orders to buy and sell stocks or currencies. You may have questions that need answers, and a responsive, polite customer service would then be desirable.

You may also want to see features that will enhance your experiences, such as the addition of payment methods that provide quick deposits or withdrawals. Some currency traders may want a cold wallet that will enable them to send profits out of their trading account so they can reserve what they have made and work with the rest. Every currency trader wants certain things out of their work with a currency broker. If this is lacking, then there will be problems.

The only way to know if a broker is suitable for your business is by looking at their track record. Luckily, online forums and blogs abound. On these blogs, you can get first-hand information from other traders about how good or bad a broker from South Africa is. Such independent sources of information can tell you a lot about the track record of the currency broker.



Product Offerings

The product offerings of a currency broker should be a factor to be considered in choosing brokers. Currency traders who are leaving EU and UK brokerages are doing so for a reason. They want a better deal than they are being offered in terms of margin requirements. 

How well do currency brokers in South Africa meet this need?

This is where a look at the product offerings comes in handy. For instance, ThinkMarkets offers leverage of between 1:100 and 1:500. These leverage levels cut the margin requirements for operating a stock trading account. Not all currency brokers in South Africa meet this requirement.

It doesn’t end there. There are some aspects of the contract specifications that may appeal to some traders without appealing to others. This is where individuality comes in. Make sure you choose a broker that has contract specifications that suit you.



Customer Support

Customer support is at the heart of the trading experience. We have all been in situations where we had more questions and answers, and this is where a responsive customer support team comes in.

Many brokers are now fine-tuning their customer support department to make them more suited to local requirements. What works for traders in one region may not work for traders in another region. Accessing a customer support officer who understands the needs of the traders in an area and can adapt to responding appropriately allows the trader to have a well-rounded experience.



Trader Insurance

Trader insurance is gradually becoming a very integral part of the trader's experience. ThinkMarkets has an insurance policy that protects traders for up to $1m in case of the unlikely event of bankruptcy. This package is far above what is provided by similar investor protection funds in Cyprus and the UK. Trader insurance serves to boost investor confidence, knowing that funds are kept safe from any untoward events that happen from the broker's side of the equation.

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How to Avoid Getting Scammed

To avoid getting scammed in your quest for a broker in South Africa, you need to understand what a typical currency trading scam is. Most of the currency trading scams perpetrated by brokers centre around the following:

  • providing a bonus with large volume requirements which can never be met by the trader

  • stop hunting

  • failure to pay out withdrawals

  • consistently bad fills during execution

If you do a thorough search on online currency trading forums, it will not be hard to come across more information on these currency trading scams. If you want to avoid these currency trading scams, you have to open an account and trade with a trusted name in the business. 


Here are a few rules on how to avoid these scams: 

  • The entire process starts with knowing who you are operating an account with. Is the broker regulated with a good track record? Are there instances of non-payment of withdrawals?
  • Watch out for brokers who hunt your stops (i.e. manually trigger your stops before the market price gets to that point). This is a fraudulent practice. Fortunately, ThinkMarkets provides one of the safest environments that are devoid of such approaches.
  • Use a broker that pays out withdrawals and has a very transparent area for members. You see every piece of information, every transaction and nothing is hidden.
  • Choose a broker that can ensure fast executions without excessive requotes.
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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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