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What you need to know about the South African stock market and how to trade shares

trade stocks in south africa


1. Introduction
2. What is a stock?
3. What is the stock market?
4. Things you need to know to learn how to trade stocks
5. Types of stocks
6. Is it legal to trade stocks in South Africa?
7. Trading stocks in South Africa
8. Benefits of trading stocks
9. Conclusion
10. FAQs


If you have seen the movie "Margin Call," you likely understand that there is a lot of money to be made in the stock market and a lot of money to lose. However, if you have not seen the movie, here is an inside tip: many of the world's richest men trade stocks and shares. So there is a lot of money to be made in the stock markets, and today you will be gaining insights into how to trade stocks.

There are generally two sentiments that are attached to trading the stock markets by people who are new to it. The first is fear. Millions of dollars have been lost in the stock market in a matter of days, and there are times when there is a crash in the market, which can deeply deplete a person's portfolio. News and stories of this kind create fear in the minds of those who are new to the market. On the other hand, however, some enter the market with a greedy mindset.

Their only motivation is the stories of those who made it big in the market, and they want to replicate that result in a very short period. Unfortunately for these sorts of people, the stock market always tends to go against their expectations.

In learning how to trade stocks, you would need to know a couple of things. They are the basic building blocks before entering the stock market. But before we go into all of that, what exactly is a stock, and what is the stock market?

What is a stock?

Stocks or shares are financial instruments that represent ownership of a corporation or company, as well as a proportionate claim on its assets and profits. The simplest way to define Stocks is that they are units of ownership in a company, also known as shares or equities. You are acquiring a piece of a business when you buy a share of stock, entitling you to certain benefits. Therefore, the terms Stocks, Shares, and Equities can be used interchangeably. Understanding this definition puts you on the path to knowing how to trade stocks.

What is the stock market?

Now that you know what a stock is, what then is the stock market? When the word market is used, the image of a typical market in Pretoria or Cape Town might come to mind, but it is pretty apparent that you do not buy pieces of a company in a regular market.

The stock market is where shares of publicly traded companies can be traded. Companies raise capital on the primary market when they offer shares for sale to members of the public in an initial public offering (IPO). It is also called the stock exchange market. Stock exchanges facilitate the trading of company stock and other securities among stockbrokers. Exchange is the only place where a stock can be bought or sold. The exchange serves as the meeting point for buyers and sellers.

In South Africa, the major Stock Exchange market is the Johannesburg Stock Exchange (JSE). The Johannesburg Stock Exchange has 365 companies listed for trading, meaning you can buy and sell the shares of 365 companies in South Africa on the Johannesburg Stock Exchange. In addition, the South African Futures Exchange (SAFEX) and the Bond Exchange of South Africa (BESA) were acquired by the Johannesburg Stock Exchange in 2001 and 2009, respectively.

JSE, one of Africa's oldest and most renowned stock exchanges, offers a variety of financial instruments. A strong system of regulations, along with the depth and liquidity of the JSE, makes it an appealing investment option for local and international investors seeking exposure to businesses and assets in South Africa and the African continent. If you want to know how to trade stocks in South Africa, ample knowledge of what the JSE does is important.

Things you need to know to learn how to trade stocks

1. Dividends

Dividends are payments companies make to shareholders to share profits. For example, a company may give its shareholders a dividend as a cash payment or other form. These dividends are paid continuously, and they are a way for investors to earn a return on their investments. However, when learning how to trade stocks, you need to keep in mind that not all stocks pay dividends, and if your goal is to invest in dividends, you'll need to invest in dividend stocks.

Types of dividends

  • Cash dividends. These are the most common dividends. Dividends are usually paid directly into shareholders' brokerage accounts.
  • Special dividends. A company pays out these dividends to all its shareholders, but they do not recur like regular dividends. In many cases, companies issue a special dividend distributing accumulated profits that are not immediately required.
  • Stock dividends. The company can also pay investors by issuing additional stock shares instead of paying cash.
  • Preferred dividends. These are payments issued to holders of preferred stock. Unlike ordinary stocks, preferred stock functions more like bonds than stocks.
  • Dividend reinvestment programs (DRIPs). Through DRIPs, investors can reinvest dividends back into their company's stock at a discount, often at the time of reinvestment.

2. Trading time

Before you begin to know how to trade stocks, you have to know what time you can trade. The stock market, like a normal market, is not open 24/7. Instead, it has its closing and opening times. These times are determined by the various countries and their stock exchange markets. The hours in which the market is open depend on when investors, banks, and companies are open. It is usually between 9 a.m. and 5 p.m. in South Africa.

3. Bulls and Bears

The terms Bulls and Bears might be unfamiliar to you if you are just learning how to trade stocks in the stock exchange market. However, "Bull" and "bear" are commonly used terms in the investing world to describe market conditions. Essentially, these terms describe what is happening with stock markets, whether they are appreciating or depreciating in value. You should also be aware that market direction has an impact on your portfolio as an investor.

During a bull market, the economy is strong, and the stock market is on the rise; however, in a bear market, the economy is in recession, and the stock market is declining. So when someone says he is going bullish on a company or a sector of the market, he is projecting that the value of the company or market will rise.

4. Crashes and Corrections

In knowing how to trade stocks, understanding what corrections and crashes mean is important. Whenever the stock market drops by 10% or more, it is considered a correction. On the other hand, a crash in the stock market occurs when stock prices drop suddenly and dramatically.

5. Diversification

Diversification is the process of distributing investments between a variety of financial instruments, industries, and other categorized areas to reduce risk. In this way, it aims to get the best returns by investing in different areas that will handle similar events in different ways. For example, you could decide to buy stocks in companies that deal in food production, technology, and medicine to diversify your portfolio. For you to know how to trade stocks, diversification is an important concept you should learn.

Types of stocks

In learning how to trade stocks, knowledge of different types of stocks is vital. There are so many types or categories of stocks. The two most common categories of stocks are Common and Preferred Stocks. There are other categories involving their market capitalization, their company locations and the investment methods used on the stocks

1. Common Stocks

As the name implies, a common stock refers to stocks that can be found easily, the common ones. Many people who know how to trade stocks, and refer to stocks on the stock markets are often referring to common stocks. The capital growth of common stock yields higher returns over the long term than almost any other investment.

2. Preferred Stocks

Compared to common stock, preferred stock represents some level of ownership in a company but usually does not confer the same voting rights. The voting rights conferred by preferred stock vary depending on the company. Investors in preferred stocks usually receive a fixed dividend all their lives. Common stock, on the other hand, only pays variable dividends that are never certain.

3. Large-cap, mid-cap, and small-cap stocks

Additionally, stocks are categorized by their market capitalization, the total value of all their shares. A large-cap stock represents the biggest and most valuable companies, whereas a mid-cap or small-cap stock represents smaller companies. Mid-caps and small-caps have greater potential for future growth but are riskier investments. Large-cap stocks are generally considered safer and more conservative investments.

4. Growth stocks

Growth stocks are shares in a company whose performance is anticipated to outpace the market in the long run. Dividends are usually not paid on growth stocks. It is because companies with growth stocks usually reinvest earnings they accrue so that they can gain a competitive advantage quickly. Amazon stocks are a good example of a value stock.

5. Value stocks

The definition of a value stock is a company whose shares appear to trade for a lower price compared to its fundamentals, such as dividend yields, earnings, and sales, making it attractive to value investors. The stocks of Bank of America Corporation are a good example of value stocks.

Is it legal to trade stocks in South Africa?

Trading the financial markets in South Africa, which includes the Forex market, the stock market, and other commodity markets, is perfectly legal. So yes, it is legal to trade the stock market in South Africa, it is also perfectly legal to know how to trade stocks in South Africa.

Trading stocks in South Africa

Knowing how to trade stocks in South Africa is not as difficult as people perceive. All you need to do is register with a good stockbroker that operates within the country like PrimeFin. With PrimeFin, you can easily register to trade stocks. Then, follow the instructions given, take part in the free tutorial, and begin to trade. There are a number of brokers in South Africa, and most of them have online trading platforms in South Africa.

Benefits of trading stocks

1. Liquidity

Generally, stocks are considered liquid assets as they can be converted to cash easily and have several potential buyers at any given moment. Some assets, such as real estate, can be difficult to transfer. For example, your investment in a home could take months before it pays off. Buying stocks, however, is much easier. An investor can gain from this constant liquidity of a stock market, as it is one of the key benefits of the stock market.

2. Transparency

In every country, there is a regulating body that regulates the stock market. For instance, JSE regulates the stock market in South Africa. In addition to regulating stock exchanges, transparency in the market, and protecting investors' rights, these bodies ensure that the market functions by following their guidelines. Therefore, an investor's money and his rights are protected when they invest in the stock market. They are thus protected against any fraudulent activity on the part of the company.

3. Benefits of dividend

Dividends are rewards that corporations give to their shareholders. The dividend is simply an additional source of income the company pays to investors every year. Dividend payments will be made, regardless of whether the stock has lost its value or made a profit from the stock. An investor can use dividend income to fund a retirement or to invest in another investment to grow their portfolio over time.

4. Diversification

By providing diversification, a stock market investment offers a major advantage to investors who have invested in various types of investments. A stock market investment changes its value independently of other investments like bonds or real estate. An investor will be able to anticipate losses to other investment products if they hold stocks for a longer time. Investors avoid overly conservative investment strategies by adding stock to their portfolios and taking on greater risks. PrimeFin offers you a lot of options on the market to help you diversify your portfolio.

5. Investment Gains

An important benefit of investing in the stock market is that investors have the opportunity to earn more money. As the stock market appreciates, the price of a particular stock may also increase or decrease. The profits of investors who have invested in stable companies will rise, however. In addition, by investing in several different stocks, investors will build wealth by taking advantage of the growth in multiple industries, which will result in profit.


By now, you know what a stock is, what the stock market is, the basic things you need to know about trading the stock market and the types of stocks. Essentially, the basic knowledge you need is to learn how to trade the stock market. With this knowledge, you can confidently answer people when they ask for information on how to trade stocks. PrimeFin is your accredited broker and can ease your journey into the stock market.


Does your broker matter when you want to start trading stocks?

Yes, the role of a broker is indispensable when it comes to stocks trading. An experienced broker will make your journey easier and help you enter the market safely. You also need one with the right tools to help you learn on the go. All of these benefits and more are provided by PrimeFin, as they intend to provide you with a trading platform with all the help on your side from the very beginning.

When you are a beginner, is it safe to invest in unlisted stocks?

Unlisted stocks are often a source of stock market questions for traders. A good understanding of unlisted stocks is a prerequisite to investing in them. Inexperienced investors often lack this knowledge. Investing in unlisted stocks is only an option if your firm is concerned about its future growth.

When researching stocks, how much time should I spend?

For those who know how to trade stocks, they know that there is no one-size-fits-all approach to researching stocks. The historical charts, price patterns, and so on can be relied upon if it is day trading and not long-term investing. No extensive research is needed. When considering long-term investments, you should conduct thorough research on the company. If the investment period is more than a year, you will need to study the company's fundamentals, analyze financial statements, and analyze competitors.

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