How to Choose Shares on the JSE

How to Choose Shares on the JSE revealed. We have investigated and analyzed the optimal method for South African traders to choose JSE equities.

This is a complete guide to the How to Choose Shares on the JSE.

In this in-depth guide you’ll learn:

• Brief Overview of the JSE
• How to Choose the Right Shares on the JSE
• How to choose the Right Share Broker in South Africa
• The Best Share Brokers in South Africa

Brief Overview of the JSE

A stock exchange is a trading platform for stocks, bonds, options, futures, and other equity-based financial instruments between investors, brokers, and traders.

Johannesburg Stock Exchange (JSE) is the biggest of Africa’s 29 stock exchanges and the 19th largest in the world as of June.

Its major purpose is to ease the process of acquiring new funding for business ventures, which helps the economy grow and create new jobs and wealth. The JSE is used as a pricing benchmark and a technique for controlling price risk.

How to Choose the Right Shares on the JSE

There are two especially important things that South Africans must use to help them choose the right stocks, fundamental and technical analysis.

Fundamental Analysis for longer-term investment and trading strategies

By analyzing the underlying company’s operations and the state of its industry or the overall economy, the fundamental analysis seeks to find companies with high growth potential at fair prices.

For longer-term transactions, investors have historically employed fundamental research, depending on indicators like earnings per share, price-to-earnings ratio, price-to-earnings growth, and dividend yield.

Evaluate the company’s management

Investing in a firm without understanding its management is akin to handing money over to a stranger and expecting a return.

Whether a management team is good could be determined by reading a company’s management statement and management commentary, in which the company’s senior management discusses the company’s previous performance and prospects.

A corporation with superior management will always have more opportunities for growth and longevity. In addition to handling the day-to-day operations and making strategic choices for the firm, the company’s management is a crucial factor to be familiar with.

Use the Growth Strategy to choose stocks from the JSE

Businesses are formed to expand their operations and generate profits, to distribute part of those earnings to their stockholders. Few start-ups are successful from the get-go.

However, growth investors may still see a firm as promising if it shows promising sales growth in its early days while not yet turning a profit. A firm’s stock price may begin to rise if investors determine that the company has an innovative product or a compelling competitive edge.

The stock price of a firm tends to grow in proportion to the number of new investors that buy shares of that company. These investors acquire shares in start-ups based on criteria like the company’s past and predicted revenue growth rates.

Analyze the Industry and look at the company’s competitors

Understanding the company’s industry provides a more complete view of the company’s future. Depending on their relative market share, an industry’s growth rate will facilitate the development of each company within the industry.

A market-leading firm might nonetheless underperform if the industry has overall sluggish growth. This would be the first phase of the study, identifying the sectors with the highest projected growth rate.

The company’s industry market share will enable it to seize chances before and more quickly than its competitors.

Use the Value Strategy to select stocks from the JSE

Large, well-established businesses that look to be priced below their sales or profits per share are sought after by value investors.

Those types of investors tend to choose market leaders in their respective fields, even if they are far beyond their firms’ peak revenue growth years, because of the consistent dividends these companies often give out.

Value stocks often have a low price-to-book value ratio, high dividend yield, and a low price-to-earnings ratio.

Go through Financial Statements and Ratios

A company’s financial statements include:

• The balance sheet reflects the company’s standing.
• The company’s income statement reflects its performance.
• The cash flow statement indicates the company’s liquidity and cash position.

Financial Ratios allow an investor to compare the performance of a firm to that of its peers in several categories. Profitability, liquidity, solvency, valuations, and operational ratios might be the most crucial factors.

Technical Analysis for overall stock performance and short-term strategies

Technical analysis, as opposed to fundamental analysis, looks for statistical patterns on stock charts in the hopes of predicting future price and volume movements rather than focusing on the fundamentals of the underlying firm.

The argument behind this is that reading a balance sheet is pointless since stock prices already represent all information about a certain firm that is readily accessible to the public.

Trading professionals have always utilized technical analysis for shorter-term transactions since it focuses on price and volume movements.

Use Technical Signals

Using technical analysis to identify stocks often comprises three steps: stock screening, chart scanning, and trade setup. The objective of stock screening is to generate a list of 20 to 25 prospects utilizing a set of technical criteria.

Then, you will attempt to reduce this list to three or four options by analyzing the charts for prospective entrances or spots where it may make sense to purchase. Finally, you will do a more comprehensive chart analysis and choose the asset to trade.

Apply technical analysis to your stock options

• Share Price and Market Cap – Valuation and market capitalization This might be a fantastic starting point since it enables you to remove many stocks immediately. For instance, if you are uninterested in stocks valued at over 1,000 ZAR, you can eliminate them from the screen.
• If you wish to purchase stocks with the hope that their prices will grow, or “go long,” then you should focus on sectors and industries that have a decent record of doing so, whereas sectors and industries with a bad record of accomplishment doing so should be avoided when shorting stocks.
• Share Price Momentum – Typically, the technical trader seeks to discover stocks with strong uptrends for potential purchases and stocks with weak downtrends for shorting. Using moving averages, which are trend-following indicators that smooth out day-to-day price fluctuations to reveal a stock’s broad direction over time, is one approach to uncovering them.

Scan the Charts of your shortlist

After establishing a list of potential applicants, it is important to identify individuals with strong entrance points.

Breakouts in the direction of the trend—that is, equities experiencing a significant price increase—and pullbacks, which are short-term swings in the opposite direction of the longer-term trend, are two typical entry methods.

Finalizing Your decision using a trade setup

A few indicators, including price patterns, volume, moving averages, and the stochastic oscillator, could be useful when deciding between the shares you have shortlisted.

Stock selection need not be difficult, but it does need flexibility. Look for shifting markets, but also be ready to not trade. Consider both short and long alternatives, and always remained objective and disciplined.

How to choose the Right Share Broker in South Africa

South African traders could not have picked a more favorable time to enter the investment market than the present. Competition among online brokers is high, which means costs are dropping down and features are being boosted.

Those interested in trading global financial instruments could choose from a wide variety of online forex and CFD brokers. However, there are several factors to consider when choosing a broker and we will go through them here.

Commission Charges

Individual stocks, options, mutual funds, exchange-traded funds, and bonds are the main investment types offered by brokers. Some will also provide exposure to the forex market, futures trading, and cryptocurrency exchanges.

Both the suitability of the broker’s offerings to your investment requirements and the fees you must pay is dependent on the investments the broker has available. You should pay close attention to the commissions that are involved with the investments you like.

Overall Reliability

There is a diverse selection of brokers available. Several have been popular for many years, while others have just recently emerged.

That does not imply they cannot be trusted, but if they are managing transactions for clients, they are members of a self-regulatory organization like the Financial Conduct Authority (FCA), the Financial Sector Conduct Authority (FSCA), and other regulators, or subject to additional oversight.

Account Fees

While it could be impossible to eliminate account fees, they may be kept to a minimum. To withdraw funds or investments, or to close your account, most brokers will assess a fee.

Pricing and Execution on Trades

Cost is less of a factor today, leading to commission-free transactions becoming the norm at most brokerages.

However, you should consider the brokerage’s position on the controversial practice of paying for order flow and how much it costs before making a final decision.

Additional Tools, Educational Materials, and Features

Look for a brokerage that provides free educational tools like live webinars, detailed how-to instructions, video tutorials, glossaries, and more if you are just starting in the investment world.

You should also look at the broker’s commitment to educating its customers about the inherent hazards of more complex trading tactics like options.

The Best Share Brokers in South Africa

In this article, we have listed the best brokers which offer share trading to traders. We have further identified the brokers that offer additional services and solutions to traders.

Best MetaTrader 4 / MT4 Share Broker in South Africa

Overall, IG is the best MT4 Share Broker in South Africa. IG provides traders with competitive spreads, a wide variety of account options, more than 19,000 assets, and a secure trading environment. The trading platforms offered by IG include MetaTrader 4 on all its platforms.

Best MetaTrader 5 / MT5 Share Broker in South Africa

Overall, Axiory is the best MetaTrader 5 Share Broker in South Africa. South African traders can trade in less than 200 milliseconds thanks to the trading software provided by Axiory and the data centers operated by Equinix.

South African traders have access to 150 instruments and trading resources when they use the Axiory trading platform, which supports forex, CFDs, cTrader, MetaTrader 5, and the FIX API.

Best Share Broker in South Africa for beginners

Overall, CM Trading is the best Share Broker in South Africa for beginners. All traders have access to the various trading platforms and liquidity offered by CM Trading. Beginner traders have access to a variety of instructional tools, including eBooks, trading videos, webinars, and live seminars, via CM Trading. These resources may be used to learn about financial markets.

Best Low Minimum Deposit Share Broker in South Africa

Overall, Axi is the best Low Minimum Deposit Share Broker in South Africa. Axi is a decentralized exchange that was developed by traders and offers competitive trading conditions.

Traders have their choice of three retail investor accounts and are not required to make a deposit. Commissions for Axi’s Pro Account are $7 per round trip, and the spreads are always zero pips.

Best ECN Share Broker in South Africa

Overall, Exness is the best ECN Share Broker in South Africa. 15,000 new customers sign up with Exness daily because they believe it to be one of the best ECN share brokers in South Africa.

Exness provides South Africans with innovative and innovative trading tools, such as MT4 and MT5, so they can choose which shares to trade.

Best Islamic / Swap-Free Share Broker in South Africa

Overall, FXTM is the best Islamic / Swap-Free Share Broker in South Africa. FXTM controls a sizeable share of the South African market, and among its many variable account types, there is an option to trade using Islamic funds.

Muslim traders have access to FXTM’s swap-free trading without the burden of increased spreads, administration fees, or other additional expenditures.

Best Forex Trading App

Overall, OANDA is the best forex trading app. The Foreign Exchange (FX) and Contracts for Difference (CFD) platforms offered by OANDA have a minimal risk because of the regulation and variety of safety features they offer.

OANDA has a mobile app available for download on Android and iOS devices that mirrors the simplicity of its desktop user interface.

Best ZAR Trading Account Share Broker in South Africa

Overall, HFM is the best ZAR trading account Share Broker in South Africa. South Africans have a lot of faith in HFM since it is a reputable and well-known broker. ZAR accounts and friendly service in several languages are both offered by HFM.

According to World Finance, HFM is one of the top 100 businesses in the world. Because of this, it is an excellent choice as a broker for South African traders of all skill levels.

Best Lowest Spread Share Broker in South Africa

Overall, LiteFinance is the best lowest spread Share Broker in South Africa. There are two retail accounts available on LiteFinance, in addition to market execution for trading. South African traders may trade on LiteFinance with costs as low as $0.25 per share and zero pip spreads.

Best Nasdaq 100 Share Broker in South Africa

Overall, AvaTrade is the best Nasdaq 100 Share Broker in South Africa. South African traders have access to worldwide markets via AvaTrade, including the Nasdaq 100.

Traders can anticipate competitive trading circumstances, the benefit of commission-free trading, and dependable trading software in addition to other advantages.

Best Volatility 75 / VIX 75 Share Broker in South Africa

Plus500 is a dominant player in the well-regulated CFD industry. Plus500 offers more than 2,000 CFDs, one of which is the VIX 75.

Plus500 offers traders the ability to conduct informed decision-making by providing tools for the technical examination of the volatility index.

Best NDD Share Broker in South Africa

Overall, Capital.com is the best NDD Share Broker in South Africa. Capital.com offers a unified live account that may be used for a variety of trading products. Capital.com is an ECN and STP NDD broker that does not charge any commissions and has spreads starting at 0.6 pips.

Best STP Share Broker in South Africa

Overall, ACY Securities is the best STP Share Broker in South Africa. ACY Securities is an industry-leading NDD broker that offers straight-through processing (STP) for all its clients’ ECN trades.

A total of sixteen financial institutions and liquidity providers from across the globe provide zero-pip spreads to ACY Securities.

Best Sign-up Bonus Share Broker in South Africa

Overall, FBS is the best sign-up bonus share broker in South Africa. FBS gives new traders who have confirmed their trading accounts a sign-up bonus that does not need a deposit as well as an additional sign-up incentive that might assist them in beginning trading immediately.

Conclusion

New investors and seasoned experts alike struggle with this dilemma whenever they are presented with a wide range of potential investments. Neither the motivations nor the time horizons of the two investors will ever be the same.

So, many investors will look at various indicators to decide which stock is best for them. South African investors still need to exercise prudence when choosing equities to add to their portfolios, since the JSE does not have as many listings as big exchanges like the NYSE.

Frequently asked questions

How do stocks generate profits?

You may profit from stock purchases in two ways: either via dividend payments or through capital gains from the stock’s rise and loss of value upon sale.

In the event of a stock price decline, would I be responsible for any financial penalties?

If the value of your stock decreases, you will not incur any financial liability as a result. However, unless your broker has negative balance protection, you would owe them money if the stock price decreased more than the margin percentage you used to finance the transaction.

Which P/E ratio is optimal?

No one value defines what constitutes a “good” price-to-earnings ratio. The current average P/E ratio in the market is between 20 and 25, therefore any P/E ratio over 25 may be deemed undesirable, while any P/E ratio below 20 may be seen as favorable.

Is there anything you need to know before investing in the JSE?

You must carry out thorough research into the stocks that you want to purchase if you want to choose your stocks yourself. You must understand the company in which you are investing to ensure that you make a well-informed investment choice.

When is the best time during the day to purchase stocks?

One of the best times to buy and sell stocks due to price volatility is the hour after the market has opened from 10 am to 11 am (GMT+2), and before the market closes between 3 and 5 pm (GMT+2).