Guide to Currency Trading in Australia – 2023
Are you new to currency trading and are looking for a place to start? Great, you’ve come to the right place! Or, if you’re a more-experienced currency trader but are looking for a new currency broker to trade with, we can help you too!
FX is the world’s most-traded financial market, with an estimated USD $6 trillion of currencies traded every day. With this sort of liquidity, currency trading presents an abundance of opportunities for traders.
There are many benefits and risks to consider before deciding if online currency trading is for you. Please always conduct plenty of research before opening an account with a currency broker.
Compare Leading Australian Currency Brokers:
Compare Currency
Brokers
Main Selling Point
Trading Platform/s
ASIC-Regulated?
Segregated Bank Accounts?
AUD/USD Spread
EUR/USD Spread
USD/JPY Spread
Max. Leverage
Spread Type
MT4?
Next Steps
AU's fastest growing
FX broker
cTrader, MT4
From 1.0 pip
From 1.0 pip
From 1.0 pip
30:1
Variable
Leading currency broker,
ultra-competitive spreads
Advantage Web, MT4
From 0.5 pips
From 0.5 pips
From 0.5 pips
30:1
Variable
Low-cost currency broker,
simple trading platform
CloudTrade, MT4
0.8 pips (Fixed)
0.8 pips (Fixed)
0. 8 pips Fixed)
200:1
Fixed
Currency Trading – In a Nutshell…
Currency (or Forex, FX or foreign exchange) trading is when investors buy and sell foreign currencies in the hope of making a profit. When you trade a currency pair, you are speculating on the price movement of one currency against another.
For example, if you decide to buy AUD/USD, you are assuming that the value of the Aussie dollar will increase against the American dollar. If the price of AUD/ USD goes up, you would be correct in your assumption. Of course, if the value of AUD/ USD goes down, you have speculated incorrectly and would make a loss on that trade.
What Are The Benefits of Currency Trading?
Make money in Rising and Falling markets: when you trade currencies, you can bet that the price of a currency pair will go up or down (not just up like traditional stock trading).
Trade currencies 24/5: They say New York never sleeps, and the same applies with currencies – FX is an truly worldwide market and, depending on where you live, it can be traded 24/5 or even 24/6.
No ownership of currencies: when trading fx, you are simply betting on the price movement of a currency pair, rather than buying the physical asset (currency).
Currency trading is a leveraged product: because currency trading is a leverage product, investors can trade for a much smaller outlay than traditional bond or stock trading. Leverage means profits can be magnified very quickly, however so can your losses.
What Are Some Of The Risks Associated With Currency Trading?
Online currency trading is not for the faint-hearted – the simple fact remains that around 70-80% of currency traders will inevitably lose money when they trade FX. Here are some of the risks of currency trading;
Leverage
Listed above as one of the benefits of currency trading, leverage is somewhat of a double-edged sword. Whilst profits can be magnified quickly, so too can losses. Once again, please ensure you fully understand the risks involved before you start currency trading.
Currencies are open 24/5
FX markets get very little sleep. As currency markets are open 24 hours a day, you will need to spend plenty of time watching any open positions to ensure all is well.
Currency Volatility
Currencies are a volatile asset class and can quickly move against you – wiping your entire life savings out in a heartbeat if you do not understand the risks involved.
How To Choose The Best Currency Broker
There are many important features to consider when searching for a currency broker – some of these can be found below;
Regulation
It is recommended that you only ever trade with an ASIC-regulated currency broker (or equivalent) – this will ensure that your broker operates within a strict framework and run a business in accordance with Australian laws and regulations.
Currency Trading Platform – is it for you?
Test out a couple of currency trading platforms before committing to one as each and every broker offers something different. Most brokers will offer a demo account where you can login and test out their trading platform before opening a live account. Please test out a few demo accounts and see what features are important to you.
Currency Trading Costs
Currency brokers make their money through trading costs such as spreads, commissions, overnight financing charges etc. Always compare the charges of each broker you’re interested in so you know who is the cheapest. Go with a currency broker that offers fair, transparent and honest pricing! And remember, the wider the spread, the more you’re being charged to trade.
Customer Support
The quality and speed of support you receive is very important. As the currency markets are open 24/5, you’ll want a broker who is easily accessible. Support with a smile is a must too!
How Does Online Currency Trading Work?
All currencies on the global fx market are quoted as pairs – i.e. the value of one currency against another. If you consider EUR/USD at a price of 1.13; this simply means that 1 EUR is equal to USD $1.13.
When a currency trader opens a trade, they are buying or selling one of the currencies in the hope of making a profit. For example, say you open a BUY trade on the AUD/USD currency pair. This is saying that you believe the Australian Dollar will strengthen against the U.S Dollar. If you open this trade and the value of AUD/USD increases, your assumption would have been correct and you would make a profit on that trade. Of course, if the value had of declined you’d make a loss.
What’s important to remember is that when you trade currencies at no stage do you actually own any currencies. Instead you are purely speculating on the price movement of the currency pair.
Currency trades are typically leveraged. This means you only have to contribute a small proportion of the total value of the trade in order to open a position. Leveraged trading allows you take out a small stake in a much larger trade, with your broker making up the shortfall.