Day trading, the practice of buying and selling financial instruments within a single trading day, has gained traction in South Africa as a potential career path. The flexibility, potential for significant earnings, and the appeal of being your own boss are compelling reasons. However, while it’s possible to make a living day trading, it’s not without challenges. Here’s a deep dive into various elements of day trading that can help you better understand what it takes to build a sustainable career as a day trader in South Africa.
Understanding Day Trading
Day trading focuses on short-term price movements across markets like forex, stocks, commodities, and cryptocurrencies. Positions are closed before the end of the trading day to avoid overnight risks.
In South Africa, forex is a particularly popular market for day traders due to its high liquidity, volatility, and 24/5 accessibility. There are also plenty of day traders in South Africa that trade stocks listed on the Johannesburg Stock Exchange (JSE).
Note: As a day trader in South Africa, you are not limited to JSE stock, as there are many trading platforms online that will allow you to speculate on shares listed on stock markets all over the world, including famous stock markets like the New York Stock Exchange and the London Stock Exchange.
Why is Day Trading Growing in Popularity in South Africa?
Several reasons are believed to fuel the growing popularity of daytrading in South Africa, and below we will take a look at some of them.
The possibility of earning non-ZAR money
Day traders in South Africa using online platforms can earn in foreign currencies like the US Dollar or Euro, which is attractive given the volatility of the South African Rand (ZAR). Having an income stream that is not in ZAR can help cushion your economy against the volatility and inflation rate of the ZAR.
Day trading is legal and regulated in South Africa
Day trading using online platforms is legal and regulated in South Africa, and a governmental agency is regulating and overseeing South African brokers. Having a solid legal framework has helped boost interest in online trading – including day trading – in South Africa.
More brokers are targeting South African traders
Online trading is legal and regulated in South Africa, and this has caught the attention of many international brokerage firms which are now very active on the South Africa market. At the same time, a multitude of domestic South African brokerage firms have emerged, offering a tailor made experience for South African traders, including the ability to keep ZAR accounts, make deposits and withdrawals in ZAR, and use locally popular mobile payment methods and transfers to and from South African bank accounts. To compete with the local brokerage firms, some of the international firms have begun offering these perks to, as they wish to remain competitive on the growing South African market.
A high level of unemployment and underemployment
South Africa has high level of unemployment (around 33% in 2024) and underemployment. For many South Africans, finding alternative sources of income instead of waiting around for a job offer is crucial. Day trading is a legal and reputable way to earn a living, and you no longer need a huge bankroll to get started. Day trading offers a path to financial independence that doesn’t rely on traditional employment structures. You do not need an economics degree from a university or have the right connections to get a chance.
Flexibility
The freedom to work independently and set your own work schedule is another significant draw of day trading, especially among traders who wish to develop their day trading skills gradually, without quitting their job or closing down their business. For beginners, it is a very good idea to keep day trading as a hobby / side-gig instead of trying to rely on it full-time from day one, as it can take a long time to become profitable.
Improvements in infrastructure and increased smartphone use
In recent years, the infrastructure for internet connections has improved greatly in South Africa, and a lot of people now also have access to a smartphone. You no longer need to move to a big city and sit in front of an expensive computer in a downtown office to be a trader. Day trading is today a viable option even for people in more remote areas, where other employment opportunities may be more limited.
Can You Make a Living Day Trading in South Africa?
Yes, it is possible to make a living day trading in South Africa, but many of those who try will fail, and it takes a lot to become consistently profitable. Many traders do make a living from day trading, but it’s not without hard work, setbacks, and dedication.
A lot of factors will impact your success and day trading is not a low-risk get-rich-quick scheme.
Examples of factors that can impact the success of a novice day trader:
- Skills and Knowledge
Day trading is not gambling. Consistent profitability requires a deep understanding of market behaviour, technical analysis, risk management, and more. Many novice traders fail because they are unwilling or unable to put in the time and effort required to study fields such as market dynamics, market analysis, trading psychology, and risk-management. If your plan is to just start day trading “on a hunch”, you are more likely to fail. - Self-Discipline
Emotional control is vital in the fast-paced world of day trading. Success comes from sticking to a plan, not chasing losses or reacting impulsively. - Money Management
While it’s possible to start small, earning a sustainable income typically requires sufficient capital to absorb losses and generate meaningful returns. It is possible to start day trading with a small capital, but you need to be patient and gradually grow it into something bigger before you can expect to start withdrawing money from your trading account and live off your profits.
The Challenges of Day Trading
Day trading is inherently risky. Markets can be unpredictable, and even experienced traders face losing streaks. One notable example for South African traders is how navigating the notoriously volatile currency pair USD/ZAR requires plenty of caution, as sharp price movements can quickly turn against you.
Without proper risk management, it’s easy to deplete your trading account, and it goes even quicker if you are using leverage without a suitable risk-management plan. Leverage, while providing the opportunity for higher returns, also amplifies losses.
Another challenge for day traders is the psychological pressure of relying on trading as your primary income. The need to perform consistently can lead to stress, over trading, and burnout. For a beginner, it is advisable to develop your day trading skills over time, keeping day trading as (a potentially profitable) hobby while you hold on to your other job or business.
Building a Sustainable Career in Day Trading
Here are a few examples of points that are important to consider if you are planning to build a sustainable career in day trading.
Education and Skill Development
The foundation of success in day trading is knowledge. This includes understanding how financial markets operate, mastering technical analysis tools, and staying updated on economic news that influences market movements.
Many brokers offer educational resources tailored to South African traders, including webinars, tutorials, and demo accounts. Use these tools to practice and refine your strategies before committing real money, but do not rely on information from one source only (e.g. your broker). It is always better to obtain information from different sources and be critical consumer.
There are also plenty of websites that feature information for anyone who wants to learn how to become a successful day trader. My favorite day trading resource is Daytrading.com.
Choosing the Right Broker
You need to stay clear of the fraudsters and low-quality brokers, and also make sure the broker is suitable for your particular trading style.
The Financial Sector Conduct Authority (FSCA) regulates brokers in South Africa, requiring them to adhere to strict standards.
Always test-run the platform in advance using a free demo account, to make sure it is suitable for you and your trading plan.
Developing a Trading Plan
A well-defined trading plan is critical for consistency. It will include many points, including information about which markets you’ll trade, criteria for entering and exiting trades, and risk management rules, such as limiting the amount risked per trade to 1% of your account balance.
Stick to your plan even during periods of stress, as deviating can lead to impulsive decisions and further setbacks. When you adjust your plan, do it with a cool head and all positions closed for the day.
Starting Small and Scaling Gradually
Begin with small trades to minimize risk while gaining experience. As you build confidence and consistency, gradually increase your trade sizes. Be cautious about using leverage, as it can quickly wipe out your account if the market moves against you – especially if you do not have suitable risk-management routines in place.
Maintaining a Financial Safety Net
As mentioned above, it is wise to have other sources of income (or savings) when starting as a day trader. Relying solely on trading profits can be risky, especially during the early stages when you’re still refining your strategies.
When you have been profitable for a while, consider moving some of the money you have earned into long-term investments to build a nest egg that can cushion you during losing streaks.
Understanding the Role of Technology
Technology is a game-changer for day traders. Advanced trading platforms provide real-time data, charting tools, and risk management features. Mobile apps enable traders to monitor and execute trades on the go.
Algorithmic trading and copy trading are also gaining popularity. These tools allow traders to automate strategies or learn from experienced professionals, potentially reducing the learning curve, but they also come with their own sets of risks.
Tax Implications in South Africa
Profits from day trading are taxable in South Africa. Depending on your trading activity, the South African Revenue Service (SARS) may classify your earnings as liable for income tax or for capital gains tax. Consulting a tax professional can help ensure compliance and optimize your tax strategy. Keeping detailed records of all trades is essential for accurate reporting.
Is Day Trading Worth It?
Day trading offers the potential for financial independence, but it’s not for everyone. It requires discipline, resilience, and a willingness to adapt to market conditions. For those who are prepared to invest time in learning and building their skills, it can be a rewarding career.
It is very important to approach day trading with realistic expectations. Losses are inevitable, and reaching consistent profitability can take time. By starting small, managing risk effectively, and maintaining a long-term perspective, day trading can become a feasible and sustainable way to earn a living in South Africa.
Making a living day trading in South Africa is possible, but it’s not without challenges, and success depends on a variety of factors, such as financial education, discipline, and the ability to manage risks effectively even under stress. For those who have what it takes and are willing to commit to the journey, day trading can offer a path to financial independence and flexibility – but it will not be easy.
It is crucial to approach day trading it with a focus on long-term sustainability. With the right skills, tools and preparation, day trading can become more than just a pursuit—it can be a rewarding career.