Forex Trading In Australia
Forex trading in Australia is huge. The Aussie dollar has growing global importance, and is correlated to both the Chinese economy and oil prices. Australian traders looking to learn how to trade forex have come to the right place. Here we explain how to find the best broker, the time zones that impact Aussie traders, currency pairs, strategy and how to stay safe from scams.
Top 3 Forex Brokers in Australia
We have reviewed close to 500 brokers up until November 2023 and found these to be the top 3 forex brokers for Australian traders:
Forex Trading Basics
The term ‘Forex’ refers to the foreign exchange market. This is a market where investors trade international currencies against one another.
Profits and losses in this market are made via shifts in exchange rates. It is a fast-paced market, where currencies are traded around the clock and prices change constantly. It is also an extremely big market, dwarfing the stock market with regards to the value of the trades that occur.
On a typical day, there will be trillions of dollars being traded.
Another important feature of the forex market is that it is not centralised, so buyers and sellers make deals directly with one another.
And the liquidity is high; that is to say that currencies can be bought and sold with very little impact on their value. There is no asset with higher liquidity than currency.
Forex trading in Australia is suitable for beginners to find their feet, but you will need to learn the market and you must be prepared to put the work in.
While it is a great opportunity to make money, it is not a shortcut to getting rich.
Finding A Broker
If you’re wondering how to start, the first step is to find the right forex broker to trade through. There are many brokers in Australia, and they all have their advantages and disadvantages.
It’s an important decision, so you will need to establish your priorities and find the broker who ticks the most boxes for you.
Don’t rush this step – it will be beneficial to start trading in the right way to avoid wasting time learning that you’ve made the wrong choice and then having to find a new broker.
Introduction To Forex Trading
Forex trades involve the simultaneous purchase of one currency and sale of another. This is known as a currency pair, and these currency pairs are your products. The first currency in the listing is the base currency, and the second is the quote currency.
For example, if the Australian dollar (AUD) is the base currency and the US dollar (USD) is the quote currency, you will be buying the AUD and selling the USD. When selling a currency pair, it is the other way around.
The buying price is known as the ‘bid’, and it refers to the amount of the quote currency needed to purchase the base currency. The selling price is called the ‘ask’, and works the other way around.
There are many currencies, and thus many currency pairs. Just because you live in Australia, doesn’t mean you must trade Australian currency. You could buy any currency pair you like.
The key to making money as a forex trader is to understand the changes that are likely to occur with currency values. You must follow the shifts in the value of both currencies in a pair.
Platforms and Accounts
There are three elements to consider when thinking about how you will work as a forex trader:
- The forex broker you will work through
- The trading platform your broker offers
- The strategy you intend to apply
When considering a forex broker, the most important thing to think about is whether they are trustworthy.
First and foremost, it should be regulated by a government body. For Australia, this means the Australian Securities Investment Commission (ASIC).
This organisation maintains Australia’s company name registers, offering an online service where you can search for those company names. With the forex market not being centralised, it is more vulnerable to fraud than some other markets.
However, if a broker appears on the ASIC list then it is regulated. This means it must meet industry standards, and is subject to regular audits and reviews by the agency.
Another good feature to look for is a good policy with regards to customer service. As a beginner looking for the best forex trading platform in Australia, you will probably have many questions to ask.
When you choose a broker that is committed to a high standard of customer service, they will be willing and able to answer your questions as and when you need to ask.
Even experienced traders encounter technical problems and other difficulties, so a dedicated customer service team will make your entire trading life far easier.
The other key consideration is that the broker you choose has good trading conditions. You need to be able to open an account with them without encountering any troublesome obstacles.
Leverage / Margin
Check out the amount of money required to open an account. Take a look at the leverage they offer and learn whether or not they require commissions.
Leverage is essentially the money you will be borrowing from the broker – it can make it possible for you to gain more, but also puts you at risk of losing more.
The spreads are also important – do they offer fixed spreads or variable ones? Fixed spreads are not affected by news releases and volatility in the market.
A good risk management tool is always a good thing to have, as it can protect you from unexpected market behaviour.
You also need to think about the trading platform/platforms a broker provides. It is advisable to have access to a platform that incorporates all the necessary technical tools and analytics you’ll need to make informed trading decisions.
You might also want to know whether they offer a mobile app so that you can keep up with your trades on the go – most modern platforms will include this. Check out reviews of the various forex brokers and trading platforms to develop a strong understanding of them and get some impartial advice.
When you find the right broker that offers the best platforms(s), you will need to work out the best account type for you – most will offer a range of different account levels, so be sure to make the right choices for your needs.
The foreign exchange market is active 24 hours a day, 6 days a week, and they close on Sundays. The trading hours cross three specific time zones throughout the trading day. You must learn where they fit in with the Australia time zones. These trading sessions are:
- Asian – the Sydney market opens between 07:00 and 16:00 EST, while the Tokyo market opens from 09:00 to 18:00 EST)
- European – the London market is open from 17:00 until 01:00 EST
- US – the New York market opens at 22:00 EST and closes at 06:00 EST
It is essential to understand forex trading hours in Australia and the overlaps between trading sessions. Knowing what to trade is just part of the battle – you must also know when to trade to be successful.
Traders must learn how much market activity takes place during different forex trading sessions. The ones that are most important to you will depend largely on the currency pairs you are trading.
The first hour after the opening of a major market session is considered important. This period of time can give you an indication of how the rest of the session will develop.
Most forex platforms provide technical analysis that can break sessions down into charts. You must understand that when trading hours overlap, liquidity tends to go up. This is because trader participation in the market increases, and many forex brokers with raw ECN market spreads will tighten.
You should also learn when potentially market-moving news is going to be released. Announcements about things like interest rates, employment vs unemployment and GDP can all have an impact, so price movement before and after news releases can be more volatile than usual.
Forex markets are particularly sensitive to news events, so you need to learn when such announcements will be made all around the world. This way, you can choose your ideal forex trading times in Australia.
Forex trading has risen in popularity as the world as become more interconnected. Traders like the free schedule inherent in a decentralised currency market which allows them to break free from the 9-5 schedule other markets follow. One positive result of this is that a great number of forex trading education courses have appeared.
An online course is a great place to start your forex trading journey. But it isn’t always straightforward to know which courses are worth the investment of time and money. Most online forex courses will have their own teaching method and other USP’s to attract learners, but 3 common characteristics are shared by the best ones:
- The instructor should make the material enjoyable and engaging. We all learn best when our interest is held, and it can be more challenging for an online instructor to achieve this. Look for courses that include live demonstrations, graphs and charts, video recordings and a good range of supplemental materials to keep you engaged.
- The course should work flawlessly. You’re not using a book, so the online material must be delivered in a technically-proficient manner. A good online course will keep the material up-to-date, and all the video clips and other materials should be easily accessible. If parts of the course don’t work properly, it will not be easy to learn this way.
- Everything should be accurate and professionally presented. A mentor who cares about their material will ensure everything is presented professionally. Spelling errors, poor design choices, confusing fonts and poor-flowing content are all signs that an instructor has not given their course material much attention. If the instructor can’t be bothered to provide quality content, how can their course be valuable?
The forex market is dynamic, changing significantly from one hour to the next.
Good online trading courses will teach you all about the technicalities of forex trading, but will also provide strategies and suggestions for currencies that are worth investing in. You need to ensure all this information is reliable and unbiased.
Many forex brokers provide a wealth of training material, but it can be better to find independent educators who can give you what you need.
There are also many books on forex trading where you can get valuable information and reference material, and YouTubers who provide great guides and tips to help you along.
Forums and seminars are also valuable sources of education and training, so try to diversify and network to boost your knowledge base. However you prefer to learn, the most important thing is to make sure you never neglect the importance of educating yourself.
As you are considering forex trading, you may already have an understanding of much of the market. Some of the things to learn are very specific, and you should give them extra attention to ensure you understand them fully.
One such thing is forex signals, and you should have an appreciation of their importance in forex trading. A forex signal is a recommendation. It can come from a human analyst, a piece of trading software or a software robot.
These signals contain key information for entering a trade on any currency pair, including a determined price and time for the trade. Daily forex signals run in real-time, and as such they have a number of methods of notification.
The most common notifications come via SMS, social media, websites, email or RSS. A quality forex signal service can be an invaluable resource to help you succeed in the market.
In general, there are 2 types of forex signal:
- Manual signals
- Automated signals
For the first type, the person providing the signal must stare at a screen for long periods to assess when to buy and sell certain currency pairs. The decisions with this type of signal are all based on that individual’s (or team’s) interpretation, but humans can interpret the market in a way that programmes can’t.
They can observe unpredictable or awkward movements to pull out of risky trades, and can apply their skills and experience to give quality signals.
Automated signals, on the other hand, are made by software that is instructed to look out for certain types of opportunity.
The software automatically analyses the market and interprets the actions to take based on data. If the software is sufficiently sophisticated, this can be a pretty accurate signal. This is because these robots can process much more data than a human being and nothing will be missed.
Most experts will recommend using a combination of both types of signal. You need to consider your own needs and choose the option that is the best fit for you.
Forex software refers to any type of software that assists traders in analysing the market and making decisions. It will often grant you access to technical analysis and indicator tools, and may even identify good trades and execute them on autopilot in line with your chosen strategy.
Whatever level of trader you are, there are many, many options available, and it can help to explore forex trading software options to find what will be most helpful to you.
Forex software also refers to sources of quality forex signals. The trade recommendations and ideas from forex signals can make or break a trader’s career, so choose wisely.
The previous section outlined how forex signals work and how they benefit forex traders, so do some work to find the best software for your forex signal needs.
Avoiding scams is an important part of being a forex trader, because these scams are all-too-common. Keep in mind that the problem isn’t with forex itself, but with the brokers who try to exploit the market. Here are some things to look for to assess whether a broker can be trusted:
- Regulation: As previously mentioned, look for companies regulated by the ASIC. This ensures they are approved by a governing body and regularly audited to ensure their operations are legal and ethical.
- Terms and conditions: Transparency is important. Don’t ignore the small print, and look out for overly convoluted withdrawal procedures. Anything that looks questionable in the deposit procedures should also be avoided.
- Marketing: If the promises a broker makes seem too good to be true then they probably are. Profits can never be guaranteed, and there are no shortcuts to success – anyone promising otherwise is lying.
- Cold callers: If you are called out of the blue and invited to sign up to a platform, don’t do it. If you are already signed up to a platform and a ‘senior broker’ calls you with advice on where to place a trade, that’s another red flag. Reputable brokers don’t need to cold call – this includes with emails.
- Managed accounts: If the house is making decisions for you, they are unlikely to be in your best interests. Brokers will make more money from certain activities in your account, so you can’t trust them to make the best decisions for your needs.
- Channel sales: You need to be clear about who you are dealing with, so if you visit one site and it channels you through to another, you may want to think twice about working with the broker.
- Price manipulation: Brokers must set their prices against a clear and transparent benchmark, based on what’s happening in the real world. If a broker reserves the right to set its own prices, don’t trust them. They are giving themselves the right to skew the figures against you.