Trading in the forex market from Australia has some clear advantages over trading from the U.S. or Europe. One of the biggest advantages involves the high leverage ratios you can use for forex positions. These can range as high as 500:1 at Australian Securities and Investments Commission (ASIC) regulated forex brokers. But leverage represents a double-edged sword with losses magnified as much as profits.
Prepare yourself for the risks and rewards with our guide to trading forex in Australia.
Get Started with Forex in Australia
Many quality forex brokers from around the world offer services to Australian clients due to the country’s strong resource-based economy and vibrant financial sector. If you’ve never traded before, trading forex in Australia can be relatively easy. All you need to do is follow the 6 steps outlined below:
- Obtain a smartphone, PC or tablet with Internet access.
- Find an online forex broker that accepts clients from Australia.
- Open a margin account for trading forex with that broker.
- Deposit funds to your account using a payment method accepted by the broker.
- Download the broker’s trading platform or a platform you can use with that broker such as MetaTrader.
- Make your 1st trade.
Now your online brokerage account is ready to trade forex from Australia.
Australian Forex Trading Strategies
At this point, you’ll need a trading plan that incorporates a profitable trading strategy to make your chances of success more likely. You can practice your trading and test strategies through a forex demo account with your trading platform.
The trading strategies you can implement depend on your level of experience and trading expertise are listed below. All of these strategies have yielded positive results for retail forex traders who have developed profitable trading plans. These strategies can work for forex traders whether they trade from Australia or from some other location.
- Scalping: a short-term trading strategy that involves taking advantage of small market fluctuations. Scalpers enter and exit the market quickly aiming to capture profits a few pips at a time.
- Day trading: a day trader limits trading activity to a single trading session. The day trader buys and sells throughout the trading session but generally liquidates all positions before the end of the session to avoid the extra risk of carrying positions overnight.
- Swing trading: Swing or momentum trading involves establishing forex positions based on the signals generated by momentum technical indicators. The main objective for this trading strategy is to capture a swing move by buying at a low exchange rate and selling at a higher rate or by selling at a high exchange rate and liquidating at a lower level. The strategy has no time constraints, so traders hold positions for as long as needed.
- Trend trading: A trend trader generally has a long view on currency moves and establishes positions accordingly. The strategy involves identifying long-term moves in a currency pair, establishing a position in the direction of the trend and then letting the trend conclude before liquidating the position.
- News trading: For traders who keep an eye on economic and geopolitical news, news trading might be the right strategy. This strategy involves taking advantage of sharp exchange rate moves seen immediately after the release of sensitive economic data or news of significant geopolitical events.
This daily candlestick chart shows an upwards trend from 0.5506 on March 19, 2020 to 0.7063 on June 10, 2020 a trend trader could have taken advantage of after reviewing the displayed trend indicators. Source: MetaTrader.
Forex Trading Example in Australia
Australia’s national currency is the Australian dollar (AUD) with the code A$. The Australian dollar is divided into 100 smaller units known as cents. The Reserve Bank of Australia issues and manages the value of the Australian dollar that ranked 5th in forex market turnover among global currencies in April 2019.
A recent quote for the AUD/USD exchange rate was 0.6920 U.S. dollars to 1 Australian dollars. If your market analysis leads you to expect an increase in the AUD/USD exchange rate, then you might buy 100,000 Australian dollars against the U.S. dollar today at that 0.6920 exchange rate.
If the AUD/USD exchange rate then rose to 0.7020, then you would use the calculation below to determine your trading profits:
100,000 AUD x (0.7020-0.6920 USD/AUD) = 1,000 USD
To then convert that amount of U.S. dollar profit into Australian dollars, you would need to perform the following calculation:
1,000 USD ÷ 0.7020 AUD/USD = 1,424.50 AUD
Conversely, if the AUD/USD exchange rate had instead dropped to 0.6820, then your trading loss would be:
100,000 AUD x (0.6820-0.6920 USD/AUD) = -1,000 USD
That incurred loss converted into Australian dollars at a AUD/USD exchange rate of 0.6820 would be:
-1,000 USD ÷ 0.6820 USD/AUD = -1,466.27 AUD
Making Money with Forex in Australia
Making money trading forex from Australia depends on developing a successful trading plan. The plan should include a profitable trading strategy, a position sizing guide and a sound money management component.
Since Australian forex brokers allow traders to leverage positions by as much as 500:1, you can control sizable positions with a relatively small margin deposit when trading from Australian.
Your success trading forex will usually depend on how well your trading strategy performs and if you have the discipline to follow your plan. Any strategy that has proven successful can be incorporated into a trading plan — whether you prefer trading for short-term profits or trend trading to profit from long-term moves.
While a trading plan and strategy may seem like a lot of work, the rewards can make the effort well worth your while. Keep in mind that many strategies that initially perform well may eventually yield diminishing results due to changes in market conditions.
Best Online Forex Brokers in Australia
If you live in Australia, you have many options with respect to regulated forex brokers. The ASIC has oversight and strictly regulates the financial sector including forex trading in Australia. ASIC regulated forex brokers are known for their reliability and strict compliance.
If you are just starting out as a forex trader, most top brokers offer a wide range of educational resources you can access online. The list of well-regulated brokers below can help you select the best online brokerage for your needs that are available to Australian forex traders.
Pairs Offered
69
Pairs Offered
80+
Account Minimum
100 of your selected base currency
Pairs Offered
80+
1 Minute Review
FOREX.com is a one-stop-shop for forex traders. With a massive range of tradable currencies, low account minimums and an impressive trading platform, FOREX.com is an excellent choice for brokers searching for a home base for their currency trading. New traders and seasoned veterans alike will love FOREX.com’s extensive education and research center that provides free, informative forex trading courses at multiple skill levels. While FOREX.com is impressive, remember that it isn’t a standard broker. You can’t invest in the stock or bond market through your FOREX.com and you cannot open an account with tax advantages. The confusing pricing and margin structures may also be overwhelming for new forex traders.
Best For
- MetaTrader 4 users
- Beginner forex traders
- Active forex traders
Pros
- Impressive, easy-to-navigate platform
- Wide range of education and research tools
- Access to over 80 currencies to buy and sell
- Leverage available up to 50:1
Cons
- Cannot buy and sell other securities (like stocks and bonds)
- Confusing margin requirements that vary by currency
- Limited customer support options
- Cannot open an IRA or other retirement account
Pairs Offered
47
Account Minimum
$50 USD
Pairs Offered
47
1 Minute Review
Though Australian and British traders might know eToro for its easy stock and mobile trading, the broker is now expanding into the United States with cryptocurrency trading. U.S. traders can begin buying and selling both major cryptocurrencies (like Bitcoin and Ethereum) as well as smaller names (like Tron Coin and Stellar Lumens).
eToro offers traders the opportunity to invest their assets into premade portfolios or cryptocurrencies, similar to services offered by robo-advisors through traditional brokers. Though eToro isn’t a one-stop-shop for everything an investor needs, its easy-to-use platform and low spreads is a great way to enter the cryptocurrency market.
Best For
- International Forex/CFD Traders
- New cryptocurrency traders looking for an easy-to-use platform
- Traders who want to buy and sell cryptocurrencies on-the-go
Pros
- Simple platform that is easy to master
- CopyTrader feature that allows new traders to copy the same strategies used by professionals
- Virtual dummy account that gives you $100,000 to practice trades
Cons
- U.S. traders currently limited to cryptocurrencies
- Only 15 major coins available to trade
Pairs Offered
50+
Account Minimum
100 EURO
Pairs Offered
50+
1 Minute Review
A fully regulated broker with a presence in Europe, South Africa, the Middle East, British Virgin Islands, Australia and Japan, Avatrade deals with mainly forex and CFDs on stocks, commodities, indexes, forex, cryptocurrencies, etc. This brokerage is headquartered in Dublin, Ireland and began offering its services in 2006. It offers multiple trading platforms and earns mainly through spreads.
Best For
- Beginners
- Advanced traders
- Traders looking for a well-diversified portfolio
Pros
- Controlled by regulatory agencies of multiple countries
- Choice offered in terms of trading platforms
- Support available in 14 languages and trading platforms in 20 languages
- Practice/demo account available for trying out
- Breadth of trading assets
Cons
- Does not accept customers from the U.S. as it isn’t regulated in the U.S.
- Transferring funds to the account may take up to five days; withdrawals could take up to 10 days
Forex Terminology
Forex traders have developed unique terms to describe some of the market’s features. Familiarize yourself with these basic terms before you start trading:
- Lot size: a lot describes the size of a unit. For example, a standard forex lot represents 100,000 base currency units. Other smaller sizes supported by online brokers include the mini lot (10,000 units) and the micro lot (1,000 units).
- Pip: a pip represents the smallest movement in the exchange rate for a particular currency pair.
- Margin call: an action taken by a broker when holding your trading positions requires an amount of margin that exceeds the amount of funds in your account. The broker issues a notice for you to deposit additional funds to cover these positions. Some forex brokers will automatically liquidate any position that exceeds their margin requirements.
- Orders: instructions you give to your broker to execute transactions on your behalf. The most commonly used orders in the forex market include limit, market, stop-loss and take profit orders.
Is Trading Forex in Australia for You?
Trading forex requires knowledge of the market, a profitable trading strategy and the discipline to follow a trading plan. If you can meet all of these requirements, you stand a much better chance of becoming successful trading forex.
Make sure any broker you select is strictly overseen by a major financial regulator like the ASIC. Start with our recommended brokers to find success in forex today.
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2020-07-14 21:47:38Z
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