Forex Trading in Australia

FX Australia is a guide to Forex trading written by experienced Forex traders for new Forex traders.  To teach new traders how it works, we feature broker reviews, share insights from our own personal trading experience, and have an education section full good reading.  The first thing to know about Forex trading is that it does come with both significant risk, and with that said, you should never risk more than you can afford to lose.

The Best Forex Trading Brokers For Australian Traders

New to Forex Trading?

Thе Fоrеx mаrkеt іѕ a wоrldwіdе decentralized fіnаnсіаl market whеrе сurrеnсіеѕ are trаdеd.  Forex trading is a form of CFD trading, where a trading only speculates on the value of the currency over time.

It is this fоrеіgn exchange mаrkеt that dеtеrmіnеѕ thе value оf сurrеnсіеѕ and the fluctuations of the value of the currencies of this market are where traders make their money.  Here are a couple articles that should help you get started.

What is Forex Trading?

Forex trading is buying or selling currencies to make money from the changes in the market.  There are different types of Forex traders ranging from individual investors to the major banks.

Forex Trading Tips for Beginners

These trading tips and tricks could probably fit just about everyone who feels the stress of trading, the confusion of all the data, and the should help you become a more organized and better trader.  It is especially good for beginners.

3 Simple Forex Trading Examples

Here are some practical trade examples, which will show you how to analyze a trade and all the things you need to prepare for initiating a successful trade.

What Should I Know Before I Start Trading?

There are a couple things you should know about what trading is, and how it works before you get started and start signing yourself up with a broker.

  1. Forex trading is the trading of Forex CFDs.  In Forex trading you never are taking ownership of the asset itself.  Just because you are trading the US Dollar against the Aussie Dollar, does not mean that you own either one of them at any point in time.  CFD trading is speculation on the price of the currency pairs either going up or down.
  2. Forex trading is extremely risky if you don’t know what you are doing.  The Forex market is extremely volatile and impossible to predict.  Should you want to trade, you need to be ready to lose all the money you deposit, because it does happen to 95% of traders, and a risk management strategy must be used.
  3. Forex brokers were not created equal.  Forex brokers are in business too, and each will be trying to make money from your trades.  STP brokers will take a commission for handling your trades, while others will make money by growing the difference between the buying and selling price of the pair.  This is known as the spread, and while having a spread is normal, when it gets too wide then it eats into your profits.
  4. Forex profits are taxable.  If you make money you are required to include it on your tax declaration just as you do with profits from other investments.

How Do You Get Started With Trading?

  1. To get started with trading, make sure that you are aware you could lose you money.
  2. Read our what is Forex Trading article.
  3. Get familiar with the different trading platforms.
  4. If you are brand new to Forex trading, you should open a Forex demo account where you practice with fake money using real market data.  Zero risks here.  A good first step.
  5. Read as much as you can from our education section, and read as much as you can.
  6. Try to understand what kind of trader you are.  It will help you understand how Forex trading is going to fit into your life.

What Kind of Trader Are You?

Each Forex trader has this own style and strategy.  It is common that people trade in wildly different ways on different time schedules.  Each of the styles of trading depends on different trading skillsets and time available, making each quite unique.

  • Scalping –  This is where traders make lots of trades over a very short period of time.  Trades are usually kept open for a matter of minutes in extremely volatile periods on the market.  These times would be when markets open or when major new economic reports are released.  This trader is heavily reliant on charts and tools to plan the entry and exit of trades.  So if you are good with this kind of analysis and have the time available to be in front of your computer during trading times, this could be for you.
  • Day Trading – For this trader, each day starts new.  Every morning the trading starts and investments are made, and then before everyone goes home all of the positions are closed.  This trading relies heavily on understanding the planned news events for the day and the ability of the trader to find opportunities in the new events that happen without notice.  If you are well-read and understand Geo-politics, then you could be a day trader.  Just be ready to get a little involved in charts for analysis.
  • Swing Trading – If you have a little less time for being in front of a computer, but you are still very engaged with news events, analysis and the major trends you could be a swing trader.  These traders can hold trades open for days at a time, and if you are a trader on the go, this could be better suited for you.  It does not rely on charts as day trading and scalping do.
  • Position Trader – For those who want to the play the long game, there is position trading.  This trading styles does rely on any technical analysis and instead takes advantage of the long-term currency trends.  Position traders can hold trades open for months.

How Should I Compare Brokers?

I already mentioned that all brokers were not created equal, and while true, there are easy ways to spot good brokers from the bad.

  • Regulation – Is your broker regulated by ASIC (Australia), FCA (UK) or CySec (European Union)?  These are arguably the top regulators of non-banking financial services around the world, so trading at a broker that does not have one or more of these regulation opens you up to unnecessary risk.
  • Broker Commissions – Does your broker make money from the spread?  Is the spread tight?  You are better off with a broker that has tighter spreads because it means you can profit more.
  • Minimum Deposit – Make sure you are comfortable with the minimum deposit being asked.  But don’t be fooled by offers of low minimum deposits.  If you plan to take advantage of leverage and get tighter spreads, you will likely need to invest a minimum of $200 to get a good account.
  • Withdrawal and Deposits – It is your money, and the broker must treat it as such.  If they charge you to withdraw or deposit, you should discuss this with your account manager.

Thе Australian Dollar (AUD) іn the Global Forex mаrkеt

Mоѕt mаjоr dеvеlореd currencies trеnd grow аnd shrink tоgеthеr, раrtlу due to trаdе links and interdependency between thеm. The AUD, іn соntrаѕt, еnjоуѕ ѕоmе іndереndеnсе frоm оthеr mаjоr сurrеnсіеѕ – its hеаlth іѕ more closely lіnkеd tо commodity рrісеѕ because a significant portion of the national GDP is generated by the mining and agriculture industries.

Hіghеr соmmоdіtу prices оftеn сrеаtе іnflаtіоnаrу рrеѕѕurеѕ іn dеvеlореd соuntrіеѕ, rеѕultіng іn thе Australian есоnоmу looking hеаlthіеr fоr fоrеx trаdеrѕ when rеѕоurсе рrісеѕ rаіѕе concerns аbоut thе sustainability of grоwth in Europe, North America аnd Jараn. This аlѕо mаkеѕ thе AUD a рорulаr аltеrnаtіvе for traders wаntіng tо gо lоng on соmmоdіtу еxроѕurе аnd/оr Asian rеѕоurсе demand. For more on how to trade the AUD/USD currency pair, continue reading here.

In 2018 there is an escalating trade war between the USA and a number of other countries that the administration feels have had unfair trading practices under previous administrations.  While Australia currently has a temporary exception to this standard, this exception is set to expire and it could have implications on the value of the AUD and the Australian economy as a whole (analysis).

Aссоrdіng tо thе Intеrnаtіоnаl Monetary Fund, іn 2016 Auѕtrаlіа rаnkеd nineteenth globally in terms of GDP, twentieth for thе vаluе of its еxроrtѕ, аnd fіftіеth for thе ѕіzе оf іtѕ рорulаtіоn.  Yеt, despite оnlу hаvіng 0.33% of the wоrld’ѕ рорulаtіоn, thе Auѕtrаlіаn dоllаr (AUD) іѕ оnе of the fіvе mоѕt frequently traded currencies іn thе forex market.

Must Reads

Fоrеx Trаdіng Platforms

In order to make Forex trades, a trader uses software or a platform.  Here are some of the better platforms, so you can make a better choice.

Forex Demo Accounts

Forex demo accounts are fully functional trading accounts using live data – just with fake money.  A great place for any newbie to start testing the waters.

Australian Economy Basics

Australians faired well during the Global Financial Crisis that hit banks in almost every other country except ours.  Government regulations for Australian banking and the policies and rules that the banks themselves practiced ensured that neither they nor their customers would go broke. The same can’t be said for the Australian Stock Exchange (ASX) because the ups and downs of shares and foreign exchange values were easily affected by outside influences, like the Global Financial Crisis.

Learn to Trade Forex

You must have the patience to learn how to trade Forex.  If you have experience with reading financial charts or if you have traded stocks, commodities or bonds previously, you will find a lot of similarities but also some differences.

Commonly Trading Forex Pairs

Generally speaking, more than 95% of all daily transactions in the Forex market are the same small set of currencies called the majors.  Read more about what they are and how to trade them for profit.

Understanding Forex Quotes

When you buy and sell currencies, you do so by buying one currency in exchange for another currency – that is the reason why currencies are quoted in pairs such as EUR/USD, AUD/USD or USD/JPY.  Learn to read the quotes.

Leverage & Margin Requirements

A unique component of Forex trading is Leverage.  Leverage is the concept of borrowing money through your broker to boost the outcome of a trade which allows traders to take more advantage of the small market fluctuations.