Trading ZAR currency, is it worth it?
It is actually quite hard to find brokers who offer currency pairs of not that popular countries. For example, if you go to a broker it is absolutely guaranteed that they will be featuring the strongest currency pairs like USD/EUR and GBP/USD. However you never really expect to see other customer currency pairs on the markets. Currencies like ZAR in this case. The reason behind it is that most of the investors find it a lot more comfortable and safest to trade not that popular pairs.,
What these investors forget is that these currency pairs offer the most value in their opportunities. The reason behind is that these currencies are a lot more volatile. Which means that they can have drastic changes happen to them within hours, leaving opportunities for traders to make huge amounts of profits.
Today we will be speaking about the ZAR currency and simple strategy you can use for the ZAR trading.
What is a ZAR?
ZAR is a shortcut for South African Rand, which has been one of the currencies in the emerging market since 2016. It has definitely shown its worth as the trading became quite popular in South Africa and many brokers have applied for the FSB regulation. You may check the top South African forex brokers list to learn more about trusted sites that offer USD/ZAR trading as well as the ones operating under the local regulator’s umbrella.
One of the key factors for it becoming so strong is that South Africa is currently the holder of the strongest economy on the African continent. Even though you may think that this is nothing to write home about, it is still a massive achievement, considering the country’s violent past and background.
Why ZAR is so volatile?
As we already mentioned. South Africa is not one of the most stable countries out there. The ZAR has already been pegged with the economic and financial announcements within the country and a $100m investment or a cashout would lead to mayhem. For example, every time The Ministry of Finance or Economics comes out with a statement concerning the currency doesn’t matter if it is related to some changes or updates, the currency will massively spike or decline. What’s even worse about is that just mentioning that it is doing good, will cause massive changes.
Even when the finance minister was replaced last year, it caused a 7% drop within two days, that’s how fragile it can get. What’s even funnier is that they re-elected the same guy in 3 days and the currency again reacted by increasing by 5% immediately.
If you were a large scale trader trying to invest in ZAR we would strongly advise against it. But for a small volume trader, there are large amounts of profit to be made with this kind of volatility.
USD/ZAR trading strategies
Options strategies are some of the best ways you can deal with uncertainties coming from both currencies. USD and ZAR are quite similar in this regard, which gives traders the opportunity to utilize options quite easily.
As you surely know there is not a 100% working strategy in this world, you always need your brain to trade, plus you need to have some experience.
The strategy recommends you to use for trading ZAR is a fundamental analysis. We recommend you to watch the world news (what’s happening in Africa). If you see for example that some bad announcement you should assume that the ZAR is going down. The same for good news, if you hear that the economy is going well and they earn money then it’s probably going up.
There is no exact strategy, something like “now make put” or something like that. I really recommend you to watch world news here and use fundamental analysis for trading. Announcements are sometimes more important that you have ever expected.
We know that the advice may not be much, but it is honestly all it takes. Given the high volatility of the ZAR, it is impossible to sometimes tell what will affect it dramatically. So it’s best to always be prepared in case something happens. Good luck with your trading!
Recommended broker for this strategy