South Africans pile into forex trading as Covid-19 erodes savings, claims jobs – Mr Daniel Kibel, CM Trading

Covid-19 containment has cost millions of jobs and put pressure on many individuals, who have been forced to eat into savings to survive. In this interview with BizNews’ Jackie Cameron, Mr Daniel Kibel, the CEO of CM Trading, reveals that the number of active forex traders in South Africa has grown exponentially in recent months as individuals look at alternative ways to make money. Mr Kibel, who heads the largest international retail brokerage in SA, shares tips and sets out where the risks lie in trading. He has some useful suggestions for new entrants as well as more seasoned traders. – Jackie Cameron

This podcast is brought to you by CM Trading, the largest retail brokerage in South Africa. It’s a warm welcome to Mr Daniel Kibel. He is CEO of CM Trading and he’s speaking to us from his Sandton office. Mr Kibel, we understand that there are more than 1 million forex traders in Africa. How many are there in South Africa?

Wow, that’s a really good question. It’s quite difficult to know, because no one’s giving official information, but I think it’s quite clear that we can say there’s probably a few hundred thousand. South Africa is very much a hub of trading – it has been for quite a while, and CM Trading has been here since trading became popular in South Africa, and so we’ve ridden the wave. But certainly in South Africa and in the countries around South Africa; everybody’s heard about trading. Everyone wants to make some extra money and I think that’s why there are so many people who are interested in trading in South Africa as opposed to other places.

And I believe that you don’t just specialise in forex trading platforms, you help clients with other types of trading like cryptocurrencies?

Correct. To be clear, we’re a brokerage – in other words people invest, they speculate in order to make extra money, but they can do that through trading – it’s not just forex. It can be through cryptocurrencies, it could be through trading gold or oil – oil is hugely popular – people have made ridiculous sums of money in the last couple of weeks with the rise of oil; from around six dollars up to thirty four dollars. It’s been hugely lucrative for clients all around the world and South Africa as well. And we offer trading on indices such as the Nasdaq or the Dow Jones or the DAX. We’ve got other commodities such as cotton, palladium, obviously gold and silver and oil, individual stocks such as Amazon, Google. So really; we deal in the world’s largest markets. So, if you’re looking for a place to invest with minimal initial investment – CM Trading is the home for you.

How much do you need to invest in these different types of commodities and currencies?

With us, it’s $250. In my opinion, that’s not enough to feel the market; I’ve always said that you need to be putting in about $1,000 a person, but for people who want to just try and test it – $250 is fine. If you think about it as an investment; if you’re going to open a restaurant or you’re going to open up a shop, or you can invest in diamonds or property or whatever it is – you’ll be talking about basic costs of a million rand just to get things started. The beauty of the investment in the international markets is that you can start with an investment of $250, which is – (I understand) to a lot of people – a fair amount of money. But it opens up opportunities and possibilities to pretty much everyone because everyone can afford $250, when push comes to shove.

Tell us about the demographics of your core market – have you seen any changes as Covid-19 has swept across the globe?

I think what we’re seeing and it’s actually very interesting because there’s always the question; as Covid has spread across the globe – how are people going to react, because a lot of people aren’t working. People have been stuck at home, they’ve been locked down – not just in South Africa, but pretty much around the world. So you ask yourself; on one level – people have maybe got less money. On the other level – they’re stuck at home, they’re looking for something to do. And on another level – what we’re finding interesting is people are saying we need more money, we’re not working now, we need to speculate in order to accumulate. So, we really didn’t know what the reaction was going to be and what we found in the last two months is that actually people are more interested in trading, they want to take more of a chance, their desire to make money is more. And fortunately, we’ve had this huge move up (just as an example) in oil, or a huge move in the dollar rand – and what it means is that some people – obviously, some people are not making money – but some people have made a serious amount of money. We’ve had opportunities that don’t come along every day; that might sound like a terrible thing to say, but the beauty of Covid during this time in the financial markets is that they’re hugely volatile, and when the financial markets are volatile – there are huge amounts of money to be made. And what we found is; since the start of this, instead of numbers maybe going down or numbers staying the same – we’ve had maybe an increase of about 20% on our regular numbers, which is a really interesting thing. And that’s not just in South Africa. That’s around the world.

So all these people have shifted from trading as a hobby to actually trading for a living?

Everyone’s got their own story, if you like. You’ll have to ask different people that. But there’s no question; people who were interested in trading previously said, ‘well maybe I don’t have time to do it’. I go back to your first question; the number of people in Africa and specifically South Africa who were interested in trading. Everyone, as I said; they know about trading, they’ve heard about trading, so people have said, ‘Okay, I’m at home. I’m lacking in money – now is my opportunity to go and maybe make some more money’. And as I’ve said, along with some people who have unfortunately lost money – there are people who have made a fortune.

So just looking at the people who lose money – how often does that happen, and what is the maximum you can lose? Sometimes, you hear about people losing more than they’ve actually put in.

That’s an important question. At CM Trading, you can’t lose more than you put in. So, if you put in $250 – your maximum loss is $250. You put in five million dollars and your maximum loss is five million. But the beauty of trading is that there’s no limits on how much you can make. We had a client who went (I’m talking about smaller numbers) from $250 to $90,000. Now clearly; this is extremely, extremely unusual. The ability to do that is phenomenal. Not everyone’s going to do it. In fact, almost no one’s going to do that. But on a potential level it shows you what people can make. This gentleman who made that ninety thousand dollars; the maximum he could have lost of his own money was $250, but he made $90,000. Of course, there are people who are going to put in money and they’re going to lose it. That’s the nature of the beast. But there are those that are making money, there are those that are losing money.

So what type of people do you think this is best suited to? Do you have to be highly numerate or eat, breathe and sleep the markets? What kind of people do you think should be considering this?

I think what’s amazing and what’s really interesting here is that there’s no real answer to that. The answer is that those that are good at trading can do it and it doesn’t matter how many university degrees you’ve got, it doesn’t matter how much you live the market; at the end of the day – either you’ve got it or you don’t have it. And I see this all the time; I see people who’ve done courses for years and they’re still not making money. And I see newbies coming on board and they just feel the market. It’s a bit like me as a footballer; I love my football, but I’m not a player and it doesn’t matter how much I practice playing football – I’m never I’m never going to play for Arsenal, which would obviously be my dream, but it’s never going to happen. But there are certain people; you put the ball at their feet – they just know what to do with it. It’s natural. It’s the same with the markets. Some people just feel it and they know how to do it. We obviously recommend people get some learning in, we do numerous webinars. There are people around South Africa and around the world (but specifically in South Africa) offering very high quality training in order to learn how to trade, which we recommend for everyone because that’s the best way. Having an understanding of how things work is obviously better for most people, but there are some people who just get it.

What are your top tips for someone who is thinking about trading? Which security should they go for, or currency should they trade in as they develop their knowledge?

I think we need to split that into two and that all depends on risk appetite. There are those people who want to go in and they’ll say, ‘you know what. – I’m going in with my money. I’m putting in $1,000 and I want to make $20,000 out of this’. Now in order to make that twenty thousand dollars – the higher the risk, the higher the reward. So, they’re saying, ‘I’m putting in my thousand dollars with the knowledge that I could lose it or I’m going to go big’. That’s one type of person; that kind of person you could recommend to trade the dollar rand, which is hugely volatile – it can go up 20, 30, 40, 50 cents a day. On the other hand; there are people who say, ‘you know what – I would need to take things easy, I want to learn, I want to go easy on this’. And those are the people who might trade the euro against the dollar. They might trade the FTSE, for instance, but again – during these Covid times we’ve had very violent movements on most currencies, so people need to be aware of that. This is a market – it’s calmed down a little bit, but certainly the market of the last two months has been a market that has been; either we’re going to make lots of money or we’re going to lose – it’s not really in the middle. So, people who are looking for something stable and steady – that wasn’t the markets in the last two months, but now – we’re going back to normal days where people can trade. For instance, the euro against the dollar, or they can trade the FTSE or the DAX or something like that. And these are normal activities, but certainly people who are going for high risk they’ll be looking at oil, gold and the dollar against the rand.

What are the more seasoned traders doing to adapt to this environment or do they embrace the volatility?

Oh yeah, that’s where you make money – when the market moves, that’s where you make money. So, more seasoned traders are investing very much in gold, the dollar rand is hugely popular, oil is through the roof popular – I’ve never seen popularity for oil as it is right now (as I said, people made an absolute fortune on the rise of oil from $6 to $34 where it is now). Seasoned guys are getting on board and they’re bringing in more money, because this is an opportunity to make money and they know it because they’ve already made money, they’ve made money in the market. So, they’re thinking; I’ve made X, I want to make more than that. This is now my opportunity to go in and make more money. It’s more difficult for someone who’s new in the market, because they haven’t had the experience.

And when people invest; they need to use a foreign currency allowance or can they invest in rands?

No. So, let’s say; you invest in Nedbank and you invest in Rand and you get your money back in rand. So, there’s no issue, you don’t need any foreign currency authorisations or anything, because your money remains in South Africa in that bank.

And let’s just have a look at cryptocurrencies – do you find that is still a popular area?

I’m gonna be honest; I’m not in love with cryptocurrencies. There was a big bubble of cryptocurrencies, say two years ago. People are still interested, people are still trading – it’s not what it used to be. I don’t think it’s stable. There’s nothing really behind it. That’s just my own personal opinion. As such, people are still trading, but it’s not what it used to be. And I personally, as I say, we offer it at CM Trading – because people are interested in it – but I’m not the hugest fan of crypto currencies.

Why, is that because there’s a risk you won’t get your money back?

The problem with cryptocurrencies is; if I’m trading gold – there’s a physical commodity behind me. If I’m trading the FTSE or the Dow Jones – then there’s a physical market behind it. So there’s something that exists. If I’m trading dollar against the rand, I’m selling physical items there, in other words – there’s rands and there’s dollars. If I’m trading Bitcoin; it doesn’t exist, there’s nothing real there. If I’m trading there’s nothing physical there and it’s not really governed yet by any centralised financial body. And as such, I’m not comfortable with it. Now, I’m not saying it doesn’t exist because clearly it does exist and clearly there’s demand. But as far as I’m concerned, if you want something that’s a bit more stable, that has opportunity – there’s more than enough markets that are fully regulated. The crypto market – it’s got a lot of holes in it. But some people like that, obviously.

Interesting, and do you trade yourself?

Oh yes, I’m English so I do look at the Pound. I think I would either trade the pound or the FTSE. Those are my main ones. I’ve traded oil a bit as well. Those are the things that I look at. Different people look at different things; you’ve got to find something you’re comfortable with. A lot of South Africans will trade the dollar against the rand, for example, because they know their dollar rand. They know the South African economy, so they’ll trade that. Other people will trade Google, because they know Google (just as an example, again).

Do traders get much sleep?

You have to sleep. I’m a big believer in sleep. It’s critical. In any trade; one needs to put what’s called a stop loss. A stop loss is where you’re limiting your loss. In other words, if you’re buying the dollar rand (for the sake of argument) at 17.40; you say if it gets to 17.30 – I’m out, I was wrong, I’ve cut my losses, I’m getting out. So, every trader needs to put in a stop loss. Some people don’t. I believe that’s an error, but as long as that happens then you can go to sleep. You don’t need to worry about it; if it hits, it hits – if it doesn’t hit, great – happy days. And you can also put in what’s called a take profit; so, I’ll put in a take profit at 17.50 (as an example) and then I could just go and play golf if I want to.

So if your Granny wanted to trade, what would your top tip to her be?

My advice would be as such; firstly Granny needs to know how to use a computer. If they can’t use the computer, then it’s a bit of a problem for some people (for the elderly). Not everyone knows how to use a computer, but let’s assume they do; the first thing I would recommend is that they do some kind of training course – whether it be from CM Trading or privately. We’ve got numerous webinars. The next thing I would do is, I’d say put in $500 or $1000 and start trading. Don’t take much risk, do it very, very slowly – very, very minor risk, small positions – see what fits for you. Okay – you might make some money, you might lose some money, but if you’re using really small positions; you can’t really lose or make much money. And then, when you’re comfortable you know what you’re doing. Then you can jump in a bit more. Remember that at CM Trading; every single trader has what’s called a trading specialist once they’ve deposited. That trading specialist will help them; give them information on what’s going on in the market, explain to them how to open a trade, how to close a trade, how to add in a stop loss or take profit. So, that’s a specialised individual service we’re giving to everyone. So a trading specialist will say to my grandma, ‘What do you want to do, what are you interested in, what do you know?’. And based on that – he can help them. Now obviously, we don’t tell you what to trade – that’s up to you. But we can say; this is the situation in South Africa today (just as an example, again) – Moody’s are saying that they are threatening to downgrade the South African economy, which they’ve threatened to do a number of times. How is that going to affect the dollar rand? Because if they do that – the rand should weaken. So, these are the kinds of information we can give clients. We’ve got numerous tools on our website, which give people information about what’s going on in the market, general information. Information is king and is key to being a successful trader. 

Before we close off what are the regulatory type risks for people who want to trade? Do the South African authorities do any checks?

Firstly, we’re regulated under the FSCA, which is the South African regulator. So the South African regulator does numerous checks; we have to give reports etc. to our compliance officers who are responsible for passing that information over. We’re in constant contact with FSCA. There are always questions. Also, the FISA Ombudsman. So, if clients aren’t happy with things – there are always a mommy and daddy behind it.

You’ve been listening to Mr Daniel Kibel; CEO of CM Trading – the largest retail broker in South Africa.

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