How to Trade EUR ZAR
The Euro (EUR) has been a favourite in Forex, being often regarded as the most popular alternative to the US Dollar (USD).
With the European Union facing economic and geopolitical turmoil in recent years, the EUR exchange ratios have also been quite volatile.
For forex traders looking at alternatives to trade against the EUR, the South African Rand (ZAR) could be a viable choice. South Africa is the second-largest economy in Africa, which means that there will be plenty of opportunities to trade the ZAR against the EUR.
When grouped together in a single asset, EUR ZAR allows the trader to benefit from the variations of the two currencies. At Admirals, you will be able to do it by acquiring EUR ZAR CFDs.
In this article, we will go through everything you need to know about how to trade EUR ZAR. You will learn more about the basics, as well as some of the advantages and disadvantages.
Sounds interesting? Let’s begin!
Table of Contents
How to Trade EUR ZAR: An Introduction
The one major difference is that you will be trading the EUR against the currency of a developing country. In Forex, this is known as an exotic pair.
The EUR has long been one of the go-to options in Forex. Most traders will usually have it in their portfolio, as the EUR is a very popular alternative to the USD.
With South Africa being among the largest economies in the African continent, the ZAR is also a common asset for traders looking for ways to diversify their portfolios.
In the EUR ZAR pair, the order in which the assets are listed matters. The first currency is referred to as the base currency, while the second one is the quotation or quote currency.
In other words, for the EUR ZAR pair, we will be using the ZAR to determine the EUR’s unit price. If EUR ZAR is listed at 20.00, it means you will need R20.00 to buy €1.00.
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Price Drivers for the EUR and the ZAR
Both the Euro and the South African Rand can be affected by multiple factors, such as:
- National and international politics.
- Environmental problems.
- Economic policies.
- Market movements.
As a popular asset, the EUR is often seen as a safe alternative. When the EU’s economy is doing well, or when other safe assets are doing poorly, traders will often jump ship to the EUR, which in turn will strengthen it.
In other words, you should also monitor other assets to anticipate similar movements.
In the ZAR’s case, it’s worth keeping an eye on the South African economy. Just like most developing countries, South Africa relies heavily on commodities. In this case, the South African economy is driven by mining.
Monitoring the metal commodities market will be a great help.
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Advantages and Disadvantages of Trading EUR ZAR
As with any tradeable asset or instrument, they always come with both advantages and disadvantages that one should consider before trading and investing.
Here are some of the pros and cons of trading EUR ZAR:
Advantages of Trading EUR ZAR
- Trading EUR ZAR will provide you with exposure to a different market. This is a great opportunity to diversify your portfolio.
- South Africa is one of the safest options among developing countries. It has the seventh-highest HDI in Africa, the second-biggest economy in the continent, and is also the 39th-ranked economy in the world. South Africa is part of BRICS and G20. The country is also relatively stable politically.
Disadvantages of Trading EURZAR
- As an exotic pair, EUR ZAR prices are a lot more volatile compared to major forex pairs. Of course, you can also think of it as an opportunity to profit. It all comes down to your trading style and your trading strategy, and how you weigh risk versus reward.
- Since this isn’t a very common pair, you will need to pay additional attention to the market’s movements. You will likely need to do some extra research as well, which is time-consuming.
Trading EUR ZAR at Admirals
At Admirals, you can group both the EUR and the ZAR into a single asset with the EUR ZAR CFD.
A CFD, short for Contract for Difference, lets you trade an asset without owning it.
As the name suggests, you will instead establish a contract with the broker. Once you decide to end the contract, you will then be paid the difference in price between the asset’s initial price and its current one.
Please note, CFD trading comes with high risk, meaning it is most important to establish your risk tolerance beforehand, as well as have a strategy in place.
If you are just getting started, Admirals offers a demo account as well. With an Admirals demo account, you won’t be using real capital, but instead virtual funds for the sake of practice.
Instead, you will be able to practice with virtual funds until you get used to trading. Once you feel confident, you can deposit to fund your Admirals live account and start trading with real assets.
Admirals offers state-of-art trading platforms as well, including the MetaTrader 5. MT5 provides you with multiple tools, including relevant news feeds, financial indicators, graphics, and much more.
You can also make use of automated trading, which uses trading bots to complete the transactions. With automated trading, you can set up your own indicators, or buy pre-programmed trading bots. Once the specified conditions are met, the program will then complete the trade for you.
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How to Trade EUR ZAR: Conclusion
Trading EUR ZAR is an alternative that traders can consider to expand and diversify their portfolio. South Africa is among the most reliable developing economies, which makes the Rand a better option compared to other similar currencies.
EUR ZAR is an exotic pairing, which makes it far more volatile than major pairings such as EUR USD or EUR GBP. Before getting started, make sure that you are aware of the risks involved, and that you are willing to accept them.
Overall, there are multiple ways to trade EURZAR, which could make it a potential addition to your portfolio. As always, compare the pros and the cons before trading or investing, as well as your risk management.
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How to start trading in South Africa?
In order to start trading in South Africa, one may do the following:
- Decide what instruments you would like to trade based on your risk profile.
- Register with a regulated online broker in the given residence jurisdiction.
- Choose your position size, open your trade and establish your Stop Loss or price to close the trade.
Is trading forex legal in South Africa?
Overall, trading forex is legal in South Africa. It is important to note, that those who trade forex in South Africa need to be aware of any legal liabilities, for example, they must prove that they use legal banking options based on their jurisdiction.
Other Articles of Interest:
- Top 5 Best South African Stocks to Watch
- Top 5 Best Crypto to Watch in South Africa
- How to Trade the South African Rand
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