So many people have been caught out by the “get rich quick” advertising of foreign currency trading platforms and have failed to do their homework properly. If you really want to get into foreign currency trading, you can do it for a faction of the cost.
Last year we wrote about companies offering courses on foreign currency trading through online adverts and social media. Through readers’ letters we raised a warning about their methods.
There are many companies offering to teach you the secrets of trading at a substantial fee. Mostly they target foreign currency trading but some may also advertise similar services for trading on the JSE.
One company that has been very aggressive in its marketing has been Knowledge to Action. They offer an intensive weekend course for R18 000 and once you start trading you have to open an account with a minimum deposit with an overseas trading platform called ETX Capital. You also have to subscribe to charting software at R 1000 (125 USD) a month.
What they do not tell you is that you can obtain all of this for free by going directly to the broker. These companies are simply charging you for something you could access yourself; it’s just that you didn’t know you could.
South African based foreign currency trading houses like Global Trader, World Spread Trader and Standard Bank’s Standard FX Trader all offer have free training, free access to the platforms, free research and free charting software.
How they operate
These advertised businesses are built around legitimate overseas trading platforms. James Saulez, head of online trading at Global Trader explains that legitimate offshore brokerages sign contracts with local introducing agents or partners in other countries who receive a kickback off revenue earned.
Saulez says these agents go on to build businesses around these agreements. These businesses offer educational seminars, courseware and access to a platform all at very inflated prices. “ETX Capital for example is an above the board London based derivative broker. If you went directly there would be no minimum deposit or monthly fee, it is so competitive overseas. It is the local partners that have put in all the costs.
“They get a kick back on the trade but they prefer to make upfront revenue by charging for educational material and seminars and make promises about ongoing education that never happens,” says Saulez.
Global Trader has experienced some of these tactics first hand as they have had to cancel some of their contracts with their own introducing agents when they discovered that the agents were telling clients they represented Global Trader and that they required R15 000 for the platform, even though accessing Global Trader’s platform is for free. “We would get calls from clients asking if we had received the R15 000’” says Saulez who explains that many of these companies are selling trading platforms and technical packages that are actually available for free. “They charge enough to make people believe it is serious but amounts small enough to put on your credit card”.
The aspirational sale
One way to know whether or not you are dealing with a legitimate broker is the marketing. If you look at websites like Global Trader, World Spread Trading or Standard FX Trader, there is no aspirational marketing, no promise of getting rich quick. Yet these other businesses sell the promise of easy money and great riches and that you are just one seminar away from making “big bucks”.
“Aspirational based advertising should be a warning sign and it is very misleading. The reality is that you can lose a lot of money trading forex. Our emphasis is all on education, you will not see any aspirational elements in our marketing material,” says Saulez.
Breaking the law
Apart from the fact that you are being taken for a ride, you may also be breaking the law. Many of these companies allow you to trade using your credit card. This is against the rules of our exchange controls. If you want to trade overseas you have to get foreign exchange approval and it must form part of your foreign investment allowance.
How to access trading for free:
Global Trader, World Spread Trader and Standard FX Trader are three South African based companies with global ties that allow you to trade currencies and you only pay a fee when you trade.
There is no fee to access the platform; they provide charting tools, technical analysis and educational support for free. So rather than blowing R15 000 to R20 000 on signing up to dubious platform, use it to kick start your trading portfolio.
Global Trader and World Spread Trader both offer spread trading which allows you to trade currencies with rands so you do not have to use your foreign investment allowance. They also offer offshore trading capability for investors with offshore funds. Standard FX Trader offers foreign currency trading offshore so you will need to apply for your foreign investment allowance.
Rupert Brown, head of collateralised foreign exchange trading at Standard FX Trader says the advantage of dealing with an institution like Standard Bank is that you are dealing with a large reputable bank and you know where your funds are should you encounter a problem.
Good brokerages make their money through long-term relationships so the focus in on educational support. They cannot grow their businesses if customers are losing money. Any good brokerage offers simulated accounts which allow you to trade without using real money until you are comfortable to begin.
Brown says Standard FX Trader offers a 3y risk-free no obligation demo account. “This simulated trading is exactly the same as live trading; there is no difference except you are not using real money”.
This allows first time traders to get a real feel for what trading is about and the risks that are involved. Clients are encouraged to phone the team and ask for help and advice. “We tutor people on how to trade so they can make informed decision without putting any cash down”
Brown says they also encourage people to go onto the website which provides detailed educational information such as video tutorials. (http://corporateandinvestment.standardbank.co.za/standardfxtrader/education_centre.html)
“Education is free, the platform is free, there are no monthly fees and we don’t charge fees for additional charting platforms”.
Although Standard FX Trader does not provide advice on what to buy, once you become an active client you have full access to their global research to help you make your own decisions.
Global Trader (www.gt247.com) offers free seminars and next year will be creating learning plans that will take clients through a 3 to 4 month experience learning on simulated platform before starting real trades. Global Trader has a trading desk that will assist clients with trading ideas and clients will receive regular phone calls from the team to offer support.
Saulez says one of the biggest problems with the seminars offered by the marketing companies is that they cram your head full of information over a weekend and then tell you that you are ready to start trading, there is no follow through or on-going support.
Saulez says only brokers that are registered with the Financial Services Board (FSB) can offer advice. If you receive trading advice from someone who is not registered you will not be protected under the FAIS Act.
Trading speed
One of the selling points the marketing companies use is that local trading platforms are too slow to take advantage of international markets and therefore you have to use international platforms. Saulez says the difference is literally milliseconds and only makes a difference to institutional or highly professional forex traders who are using algorithmic based trading and rely on high end technical analysis techniques.
Global Trader does offer these services through its London partner, however for the average retail customer it makes absolutely no difference and those more complicated platforms are not a good place to start. Even if you did want to trade on those platforms, it is also free!
Brown says a client’s internet connection is more of an issue and that ideally one should have an ADSL line installed to trade as clients find that 3G connectivity although capable is not as reliable.
Standard Online Trading offers free day seminars on various aspects on investing including: Contracts for Difference, Warrants, understanding company financials, trading futures, technical analysis. https://securities.standardbank.co.za/ost/
This article by Maya Fisher-French was first published in City Press
I work for Stock market performance and they are registered under FSB and their trade name is Quick trade. I too would like to trade I feel like R21 780 is alot of money for the stock market college and ontop R5000 is needed to start a trading account.
I don’t sometimes have doubts about all this. I always studied >buying and selling shares< especially ones that pay out dividends. However the money is too much.
You dont need to spend that money to start investing. Rather use it to invest!
I for one found your article quite helpful, I have been interesting in Forex Trading for almost 3 years now, however never knew where to start with all this scams on the internet. if i may ask ,do you think its wise to start trading at an early age of 20?
If you do your homework carefully you can start at any age. My recommendation is to learn with recognized platforms and ideally start with a virtual account so that you can learn without losing money. One of the risks with the less legit sites is that they create fake virtual sites where your virtual trades are not actually mirroring real trades and they show you making money when in fact you could be losing. In that way they create overconfidence and do not reflect the real risks
is Banc de Binary a good company for trading….. i’m in Gauteng. they only require $250 to start trading. should i join ???
Thank you for your query – I have got a reply which I will post on the site
Truth is I tried Standard Bank FX, I must say it not easy to trade on their platform and another thing it limited only few branches have forex trainers and sometimes you walk in a branch and no one knows about forex but only forex travel not currencies. I studied through these companies blamed but I gained experience and got face to face training.
i appreciate your artical……am situated in kenya nairobi …do the three companies named above have the free forex training institutions in kenya nairobi or the training is only done online?…..soo many people are loosing money to get trained to become forex experts due to lack of information…..
I need to find out about Kenya – will update comments once I know
I like all your comments and suggestions as I feel this is as good advice as one can get rather being robbed or cheated . I’ve been learning and trading but these companies on the net nag you too much to deposit monies so can upgrade your account.
I advise people to be aware.
Thank you for sharing your experience.
I’ve just signed up with ACMGold, who also offer free training and a free platform. And better than that, they’re also making their Independant Broker facility availble very easily for South Africans so no more dealing with these sharks… 🙂
I would like to know where can I go if I want to study forex trading and how much will I pay for that course.
as indicated in the article you do not need to pay for a course as both Standard Bank and Global Trader offer good educational courses for clients. Rather save your money and use it to start your trading porfolio
Please i want to know how much capital should i have to startup trading with forein currency?
Where must i go to register the busseness?
The thing to remember about foreign currency trading is that it is high risk so it should make up a small percentage of your total savings – certainly no more than 10%. So it would depend on how much your total savings are worth. You would need to speak to the brokers offering the platform as to how much you need to be cost effective but it is probably around R5000. Therefore you would need to have around R50 000 of savings in lower risk investments before starting to trade currencies.
You do not need to register a company to trade but you need to open an account with a broker like Standard Bank or Global Trader. I would recommend that you start using simulated trading – ie: you do not trade with your own money, until you get the hang of it
pls i need you advice i want to attend sharenet
course the are offering the following (a) introduction to the markets,(b)forex tranding for profits (c) equity,index and cfd trading. charged me R550.00 advice me if good for me to attend. if you know other institution which is ofering free of less amount pls reffer me.
Sharenet is a good company and R550 is not unreasonable, if you have the money and you also have saved money to invest then it is probably worth it. Just do not borrow money to invest!