Continuous depreciation in the price of an asset is commonly denoted as a bearish trend. GDP or Gross Domestic Product is the total value of all the goods and services produced in a country in a particular time period. Growth in GDP can be compared with other nations to predict the increase or decrease in the price of a currency pair.

This means ABC is growing faster than XYZ and the price of ABC in terms of XYZ is very likely to increase. Inflation means a rise in prices in a nation over a time period. There are multiple factors in an economy that can increase or reduce inflation. Each country has different inflation rates at a particular time interval.

Inflation rates of two currencies involved in a currency pair can be compared to predict the price movement of a currency pair. The country with a higher rate of inflation will lose its value against the one that has a lower inflation rate. The interest rate of a country that is also known as the repo rate is the basic rate at which the central bank will provide loans in a particular nation to commercial banks. Interest rates also depict the rate at which investors can earn through fixed deposits in the country.

Interest rates are decided by the central bank or the monetary authority of a nation. Interest rates can be comprehended to predict the price movements in a currency pair. Forex trading can best be learned with experience. It is a high-risk market and traders must use demo trading where they can gain experience with virtual currencies. It is a high-risk capital market and is not ideal for every type of trader. One must check the suitability, objective, and risk elements thoroughly before entering the forex market.

Understanding forex trading can be complex for those who have never traded on any financial instrument online in the past. Those who have a slight experience of trading other capital markets like stocks, cryptocurrencies, or CFDs would be very comfortable with forex trading.

Let us understand the complete process and working methodology of forex market with the help of an example. Online forex trading is done through trading platform which is a software that can be downloaded on electronic devices. The trading platform connects the traders to brokers, liquidity providers, and other forex traders. Traders place buy or sell orders through trading platforms on their preferred trading instruments.

This means that the bid price is 1. First, we will place a buy order for 1 standard lot , units of the base currency. By closing the buy position at this price, the following will be the profit.

Following will be the exposure amount in a short position. By closing the position at this position, the following will be the profit. Forex trading in Australia is legal and in compliance with a strict regulatory framework.

The Australian Securities and Exchange Commission is the regulatory authority that regulates forex trading in Australia. There are a lot of Forex and CFD brokers in Australia that are regulated by ASIC and offer leveraged trading on forex and other instruments. Trading with brokers that do not have a regulatory license from ASIC is illegal in Australia.

The first and foremost thing to do as a trader is to choose an ASIC-regulated forex broker in Australia. Brokers without ASIC regulation in Australia have high third-party risk and must be avoided. Most brokers display their regulation details on the footnote of their website.

Some also have a separate page on their website. If not available, clients can also ask the customer support executives to provide the license or registration number of the ASIC license. The ASIC regulatory license can be cross-checked from the official website of ASIC.

Clients can search for license details either with the name of the broker or the license number. This detail must be checked before choosing a forex broker in Australia.

After checking the license, potential traders should also check and compare the fees, available instruments, trading platforms, customer support, and other details of the broker.

Online reviews by professionals and existing clients can also be read to get a glance at trading experience with particular brokers. The next step to trade forex in Australia is to open a trading account with the selected broker. The account opening process is simple but each broker takes a different time to complete this process.

Following are the details that the trader needs to provide to the broker to open an account. Any spelling mistake will not allow you to open the account. The entered contact details will be cross-checked via OTP. This process can take 2 hours to 2 days depending on the service efficiency of the broker.

The trading can now be started after making an initial deposit. The minimum initial deposit amount requirement can differ from broker to broker and must be checked before opening the account. Time taken to process the transaction is also different for every deposit and withdrawal method.

For new clients, it is always advised to trade with a demo account and gain a decent amount of experience before risking real money. The demo account can also be used to check the success rates of trading strategies and suitability with different trading instruments. The cost that will be incurred by traders in forex trading will differ from broker to broker. Each broker charges different types of fees and the amount of fees can also be different.

To be familiar with the fee structure, clients must check or inquire about the following components of fees before opening the account. These are the common ways in which a forex broker will charge the traders in Australia for trading. This is the difference between the bid and ask price or the buy and sell price.

Wider spreads mean lesser profit and lesser probability to make profits in a forex trade. Clients should seek brokers that offer narrower spreads. Some brokers offer commission-based trading on currency pairs with low spreads or zero spreads. Commission-based spread-free trading is considered ideal for large volume traders and scalpers. Details of commission if charged must be checked before opening the account.

These are the charges that are incurred if a trading position is kept open overnight. Orders that are opened and closed on the same day will incur no swap fees at all. For every night the position is kept open, the swap fees will be added.

Swap rates or overnight charges differ from broker to broker on every instrument. Non-trading charges can be of various types and can be tricky to identify as they are not clearly mentioned. Clients must check the commission or fees for deposits and withdrawals.

Other non-trading charges include account opening fees, conversion fees, internal transfer fees, etc. Subscription to additional services can also cost additionally. Trading without strategy is like sailing without a compass. The sailor has no idea about the wind speed neither the direction. You look at the changes in values of currency pairs and forces that are influencing those price movements.

Traders use both fundamental and technical analysis for creating a profitable strategy. Many expert traders combine both techniques to take a hybrid approach. In short, the knowledge of technical analysis will tell you when to buy or sell and fundamental analysis tells you why the price movements. Both are indispensable weapons for a successful forex trader. What economic factors will impact the demand and supply of a currency?

Welcome to Macroeconomics , the law of demand and supply. If the demand for a currency is increasing, the trader may assume the prices will rise. On the other hand, a demand reduction may be an indication of an eventual fall. There are many factors such as economic health, political stability, global events, and others that influence the expansion and contraction of a particular currency.

For instance, the US Sub-Prime Lending Crisis in caused a massive breakdown of financial systems worldwide. In addition to global economic events, the localized changes in a national economy can also influence the currency prices of that country. For instance, the increased commodity prices globally can strengthen the Canadian dollars. Although government changes are not a frequent affair, currency prices can be affected during a transition period.

The developed countries have relatively stable regimes in comparison to developing countries. Political instability is the main reason why the currencies of many African countries are so unpredictable.

Central banks use monetary policy as an effective tool to control the demand and supply of a currency. They can reduce the interest rate in an economic slowdown and can increase to curb the inflation caused by economic growth. The fiscal policy entails taxation and government spending.

Higher taxes can drive slower credit and economic development. Both government policies can have a significant impact on the national currency. Main participants such as banks, financial institutions, or hedge funds may buy or sell a specific currency to up or down the prices.

You will be in much better positions if you have an idea about the main speculators of the forex market. Main participants such as banks, financial institutions, or hedge funds may buy or World governments publish statistical data and reports that reveal the economic health and performance over a period.

Many financial reports like employment data, inflation rate, GDP, and foreign exchange reserve can indicate the regional economic conditions, which can dramatically impact the local currency. A forex dealer can use an economic calendar to avoid unwanted surprises from the release of new data.

Charts and graphs are the primary tools of technical analysis. Charts help traders identify historical performance, ongoing trends, price movements and calculate risk to maximize gains from currency trading. Understanding different charting formats such as line, bar chart, and candlestick is essential to develop a solid trading strategy for beginners. Following are important terminologies associated with technical analysis. It is the most basic charting which helps users select a currency and its performance for a fixed period.

The bar chart shows the highest and lowest currency price points and average performance over the period chosen. It also displays the same information: open, low, high, and close. However, the representation of data is very different from the bar chart. It becomes easier for users to see the highest and lowest peaks of the currency movements with thin vertical lines.

Trend is a term used in technical analysis of capital markets that depicts the direction of the price. Generally, the price of the underlying instrument moves in a particular direction until a trend reversal is witnessed.

The tops and bottoms of the charts can be analysed to identify the price trend at a given time. Trendlines and trend reversal are very important components of technical analysis. A higher-high price action followed by a higher low represents an uptrend bullish while a lower low and lower high depict a downtrend in price movement. Support and resistance are the prices at which the trends are likely to reverse or stop moving further in that direction.

There can be multiple support and resistance levels for a single financial instrument. Support is the lower limit at which the price trend is likely to reverse or stop moving further below. Resistance is the upper limit on the price trend. Whenever a resistance or support level is broken, the price moves significantly.

These limits are created due to trend reversals and stagnancy of prices at the price that same particular level. A support or resistance level gets stronger every time it resists the price movement. As the name suggests, the moving average is an important indicator that depicts the average price movement in a given time. A moving average indicator creates a series of averages of different subsets of the full data sets of prices in a particular time interval.

Current prices below the moving average depict a buying opportunity while the prices above the moving average may benefit the sellers. There are hundreds of strategies that are used in the technical analysis of financial instruments.

Technical analysis works well on instruments with high liquidity like the forex market. Experienced traders often use technical analysis in combination with fundamental analysis to understand why the value of a currency rises or falls for the selected period. For example, if the fundamentals indicate that the US Dollar will strengthen against the Euro due to policy divergence, and the technical analysis also indicates the same, then it is much more likely that your strategy may be successful as compared to incomplete research.

You can use simple mathematical tools such as moving averages, trend lines, and others for technical analysis. You can learn about more advanced concepts like Elliott Wave Theory, Fibonacci Studies, and Pivot Points as you progress. There are plenty of risk elements involved in forex trading. We have discussed some of the major components of the risk in trading forex in Australia. Online forex trading has attracted thousands of retail investors in Australia.

Trading with a trusted and well-regulated broker ensures your funds are in safe hands. If something goes wrong, there is a security mechanism that comes into play to protect your investments. National, as well as major Tier-1 Forex Broker regulators, ensure that brokers offer fair and transparent trading environments. They set standard criteria and reporting requirements for a forex dealer before providing services to its clients. Before choosing, ensure that your broker is well-regulated and trustworthy.

There are plenty of examples of when retail investors lost their money to fake brokers and Ponzi schemes. The best way to avoid this risk is by selecting a broker having Tier I or Tier II licenses. Tier I indicates the highest level of trust, and Tier II has a low level of confidence.

UK, European, American, Australian, and Canadian regulators score well on their trust level and are called Tier I regulators. Traders based in Australia must only trade with forex brokers that are regulated with ASIC. Only this will ensure that you are trading with an authorized firm. This is the risk of extraordinary price swings in currency pairs. Forex is a complicated market as the price movement depends on countless factors.

It is active throughout the day and any event across the globe can have an impact on price movements. It is nearly impossible to correctly predict price movements. Research and analysis can greatly enhance the success rates but market risk will always prevail in the forex market. The leverage allows traders to open bigger positions with smaller margin requirements. High leverage can help in booking higher profits in case of favourable outcomes. The extent of profits, as well as losses, depends on the size of the opened position.

The bigger positions can provide dramatic losses and can also wipe out your account balance completely if a position is not closed. Beginners should not involve too much leverage in trading forex in the initial phase.

Leverage of more than is considered risky. The Australian Securities and Exchange Commission ASIC has restricted the maximum leverage that CFD brokers can offer to for major forex pairs.

The maximum leverage is lesser for CFDs on indices and commodities to protect the traders from high leverage risk. Although, clients can increase their leverage if they fulfil the ASIC criteria to become a professional traders.

Forex trading is mostly done online through trading platforms on mobile, tablets, and PC. A technical glitch can disrupt the trading experience. Traders can miss out on trading opportunities due to slow internet or processor issues. The timing to open or close a position can vary due to technical problems. Accounts can be hacked. The account credentials and passwords must be protected. Public wi-fi networks must be avoided. Fingerprint or facial recognition to login into an account can enhance the safety of traders.

Forex trading involves buying and selling currencies. These currencies are used for day-to-day activities in respective countries. Each country has different growth rates and interest rates. Their price trends will be different for each pair. The sudden price movement on any currency pair can occur at any time due to different reasons. A country might implement expansionary or contractionary monetary and fiscal policies that can affect the price trends.

Country risk is more effective in automated trading as policies implemented by countries can alter the course of price trends. There are multiple risk elements in the forex market. Choosing the right broker, taking informed decisions, technical and fundamental analysis, and other precautionary measures will reduce the risk factor.

However, risk in the forex market can be mitigated but cannot be removed completely. Leveraged forex trading involves significant financial risk. Forex trading is easily accessible for retail traders.

It is always advisable to use the demo account and trade with virtual currencies before trading with real money. This will also allow traders to know whether forex trading is suitable for them or not. There are some pros for traders trading in the forex market over other financial markets.

With daily transactions crossing over USD 5 trillion, the sheer size of the forex market makes it truly a global marketplace with several profit opportunities. The forex market operates around the clock so that you will find a trading opportunity any time of the day in at least one global time zone. As the forex market is a decentralized OTC market, its working hours are not subject to any centralized exchange system. For instance, trading hours begin at 5 PM EST in the USA on Sunday and rolls continuously with other markets until Friday at 5 PM.

Note that even though currency trading is restricted for retail traders on weekends, the exchange rate keeps moving. In addition to very low investment requirements, even the transaction cost of trading forex is relatively lower. For instance, you can start dealing in currencies with just USD or even lower. The main earning of a broker comes from the bid-ask spread.

Spread is measured in pips, the difference between the sell and buy price of a currency. A global network of banks and other financial institutions effectively oversee the market instead. In the past, those without the necessary means to trade forex directly may have used a broker to trade currencies on their behalf. Note: whether you should consider forex trading depends on your financial circumstances as well as your market knowledge and appetite for risk.

The main aim of forex trading is to predict if the value of one currency will increase or decrease relative to another. A trader might buy a currency thinking its value will increase with the aim of selling it at a profit.

Or a trader may sell a currency today on the basis it could decrease in value tomorrow and subsequently be bought back at a cheaper rate. These are similar to the symbols used on stock exchanges to identify a particular company, such as NAB for National Australia Bank on the ASX. The most-traded currency worldwide is the US dollar, which has the ticker USD. The second most popular is the euro EUR , followed by the Japanese Yen JPY , the British pound GBP , the Australian dollar AUD , Canadian dollar CAD , Swiss franc CHF and the New Zealand dollar NZD.

There are more than currencies in all worldwide. This is because when you buy one currency, you simultaneously sell the other. Each currency pair comprises two elements. When listed in a trading quote, this part is always equal to 1. The base currency is pound sterling GBP and the quote currency is euros EUR. The pairing means that £1 is worth 1. A standard lot is equivalent to trading , units of currency. This is where traders use leverage see above to avoid having to tie up all their capital in a trading position.

Leveraged trading is risky, however, because losses can be magnified until they exceed the initial amount borrowed. You can choose from a number of online platforms run by forex brokers as well as several trading apps. Make sure your provider has an Australian Financial Services Licence with ASIC or is regulated by an overseas authority although you may not be protected by Australian laws if you opt for the latter.

Read the product disclosure statement carefully to ensure you understand your exposure and risks. The more obscure the currency pair, the wider the spread is likely to be to execute a trade. Some of the most popular platforms have forums where you can speak to other users.

As the FX market is one that never sleeps except at the weekend , hour support from your platform provider is extremely useful. Some services will allow you to automatically open and close positions once certain levels of trading have been reached, ensuring your account is not on the receiving end of a nasty surprise.

Forex trading and stock trading both involve buying and selling—of currency and stocks respectively—in a bid to make money. But when you buy and sell shares, you are buying and selling a portion of ownership of a listed company, such as Tesla or Netflix.

When you trade currency, you are speculating on the movements of international currency markets to make a profit. Understanding these terms is crucial to your success as a Forex trader. Another key difference is that stock-market trading is limited to the hours of the respective markets that you are trading in. For example, the Australian Securities Exchange ASX standard trading hours are 10am to 4pm, Sydney time. Forex, on the other hand, never sleeps, with its four main trading hubs London, New York, Tokyo and Sydney each coming alive as another hub closes, with the exception of the weekends.

There are many reasons FX traders do not trade on Fridays, and online FX discussion groups are awash with opinions as to whether you should or should not trade on certain days of the week. To summarise, some FX traders feel that because many traders will be closing their positions on Friday afternoon so as not to carry open positions and associated risk into the weekend, Friday is not a great day to trade.

Because there is often a lower trading volume, causing Fridays to be unpredictable. Some traders confine their trading to the first half of Friday, some shun Friday altogether.

Many prefer Tuesday, Wednesday and Thursday due to high volume. This is not to suggest you should not trade on Fridays— or any other day for that matter— but do your research first. There are a few ways that FX traders make money, but the main two are by going long or short. Going long involves buying a currency in the hope that its value will increase so you can sell it later at a profit.

Going short, on the other hand, refers to selling a currency with the view that it could decrease in value tomorrow and subsequently be bought back at a cheaper rate. Many retail investors dream of being as successful as skilled currency traders and hedge fund bankers, but the reality is: this is very rare. However, this does not stop numerous scam platforms luring in unsuspecting traders with promises of riches and great fortune through FX, so be aware and do your research first.

Associate Editor at Forbes Advisor UK, Andrew Michael is a multiple award-winning financial journalist and editor with a special interest in investment and the stock market. His work has appeared in numerous titles including the Financial Times, The Times, the Mail on Sunday and Shares magazine. Find him on Twitter moneyandmedia. Select Region. United States. United Kingdom. Advisor Investing. Advertiser Disclosure. Andrew Michael.

Fact Checked. editor Fact Checked. Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn't affect our editors' opinions or evaluations. What does Forex Trading Involve?

Want to dive into forex trading in AU? Online FX trading Australia guide will cover everything you need to know to get started. The forex trading scene is now worth billions in Australia - and trillions globally. Chances are, every man and his dog has heard of the foreign exchange market. The fact is, it is a highly significant and fluid trading market all around the world. Living in Australia and thinking you would quite like a piece of the currency trading action? The overarching essence of forex trading is to trade currency pairs - the end goal being to speculate on the rise or fall of an exchange rate.

Although this sounds as easy as ABC, a gung ho approach to trading in the forex market usually ends in losses. Newbies often make the mistake of assuming they will pick it up as they go along - which can be a very pricy learning curve. We are going to talk about the end-to-end process of forex trading - covering how to trade currencies, forex pair types and different trade orders.

In addition to the basics, we are going to shed some light on trading strategies. Moreover - we cover key metrics to consider when searching for an online ASIC broker to execute those all-important forex trade orders. Section 1: The Foundations of Forex Trading Australia. Section 2: Get a Handle on Forex Pricing. Section 3: Australian Forex Trading Strategies. Section 4: Educate Yourself on Forex Fees, Profit Margins and Leverage. Section 5: Selecting a Great Forex Trading Broker Australia. In a nutshell, forex trading in Australia consists of using price shifts in the foreign exchange market - with the view to make gains.

So, how is this done? As we briefly mentioned above, the objective is to buy and sell currency pairs based on whether you think the value of the pair will rise or fall.

We are going to delve into this with some practical examples shortly. The main contributors to this figure are fund managers, financial institutions, commercial and central banks, and also hedge funds. Then, of course, there are retail forex traders buying and selling in their droves too. By retail clients, we mean your average Fred Nerk trading using their own money - using a personal account.

With internet access, you too can begin forex trading in Australia from the comfort of your own home, or on the go. All you need to get started is a little knowledge, a good ASIC broker and a deposit method like an Australian debit card. There are many ways you can go about this, and heaps of helpful tools and strategies to consider. All of which we are going to talk about in detail throughout this comprehensive guide on Forex Trading Australia.

In section 1, we are going to start with the bare bones of forex trading in Australia. This is to build both your knowledge of the market and how it works - but also confidence in your future trading endeavours. They all mean the same thing - 2 currencies competing against each other make a forex pair. The exchange rate of this, and any other pair, is motivated by supply and demand. The price of FX pairs and other tradable assets fluctuate throughout the trading day, usually by the second.

This means that the difference in value can be measured in micro amounts. It is for this reason that when you join a forex trading site in Australia, you will notice that the price of a pair will be quoted to you in 4 decimal places. The exception to this rule is the Japanese yen JPY - which is usually quoted in 2 decimal places. For instance, the aforementioned price of 1. We are going to talk about pips and what they mean in more detail in a moment.

Forex Trading Pairs - Top 10 Forex Pairs To Trade. Forex Volatility - What Are The Most Volatile Currency Pairs? A key characteristic of minor currency pairs is that they are made up of 2 strong currencies. Think along the lines of the Australian dollar, Canadian dollar and euro. Because minor pairs include 2 strong currencies, you can expect a good level of liquidity - however not as much as when trading major pairs. Another point to make is that minor pairs never include the US dollar - unlike major pairs which we are going to dive into next.

First, we have listed below the most popular minor forex pairs to trade via an ASIC broker:. When it comes to major currency pairs, a key characteristic is that they always contain the most traded currency on the planet - the US dollar. Consequently, you can expect lots of action in terms of trading volumes and higher liquidity when trading this FX pair category.

As we said, major forex pairs will always contain the dollar. The other currency in the pair will invariably be another strong currency like the Australian dollar, British pound, or Euro. If you are a newbie at forex trading Australia, we recommend only trading minor and major pairs until you find your feet.

To give you an idea of what major currency pairs you might find on your chosen ASIC trading platform, please see below:. You will no doubt find that the majority of the time, volatility levels will be on the low side. This is due to the high demand of majors in the market. With highly reputable economies like Australia, the US, and Europe in the mix - this is hardly surprising.

Not every broker will offer this category of forex pair. So what is an exotic forex pair? Well, exotic pairs are inclusive of one strong currency like USD and one emerging market currency. An emerging currency is defined by being a currency from a developing country or market.

Emerging currencies include the Chilean peso, Turkish lira, and Kenyan shilling, to give you an idea. As you can no doubt imagine, these currencies are not nearly as liquid. Thus trading volumes are much lower than the aforementioned forex pair types. Furthermore, and perhaps most pertinently, the exotic pair marketplace is much more volatile.

For instance, the Singaporean dollar SGD and the Danish krone DKK both derive from strong economies. But, as the respective currencies are not in high demand globally they sit within the remit of an exotic pair group. You will see below a list of exotic currency pairs, all of which can be traded - depending on whether your broker has them on offer. There is a higher risk attached to trading exotic pairs, which is why we advise avoiding them as an inexperienced forex trader.

Of course, more volatility means a potentially higher reward - if you speculate correctly. By now you should have a firm grasp of what forex trading in Australia is, and how currency pairs are categorized.

As we said pips are used universally to allow for micro shifts in a currency pair value. You will sometimes see a price quoted in 5 decimal places, depending on your trading platform. This allows brokers to illustrate a much smaller and precise percentage, with regards to the fluctuation of a pair. As a result, you are also able to use a smaller stake. In this section of our Forex Trading Australia Guide, we are going to take a look at orders. For those unaware - an order is something you submit to your broker to let them know how you wish to proceed with a trade.

To clarify, this outlines what your prediction is as to whether a forex pair will rise or fall in value. And - how much would you like to stake on that particular forecast. There are a handful of really useful orders, which we have listed below for your convenience. You will quickly realise when trading forex in Australia that a lot of orders are optional but still highly useful. With the exception of buy orders and sell orders, which are imperative. Put simply, these orders indicate to your forex broker which way you believe the market will go.

There are 2 possible scenarios with buy and sell orders:. Orders must consist of a buy order and a sell order at some point. For instance, if you entered a trade by placing a sell order believing the price will fall - you would need to exit that trade by using a buy order. Market orders and limit orders indicate at what point you would like to enter a trade. Let us explain further with a simple clarification of each. Find first an explanation of limit orders:.

Now a brief clarification on market orders:. The vast majority of experienced forex traders use limit orders frequently. This is largely because they are so price-specific - meaning traders are safe in the knowledge that they are going to enter the trade at a desirable price.

Take-profit and stop-loss orders are not obligatory like their buy and sell counterparts. With that said, we do think they are an invaluable part of risk management - which should be incorporated into your every day trading strategy moving forward. Put simply, stop-loss orders put a cork in your trade before you lose more than an amount specified by you.

Take-profits work in exactly the same way as the example above. On this time, the purpose is to lock in your profits by setting a target. A take-profit order will achieve this goal and thus - ensure that you do not need to be sat at your device for hours and hours waiting for your target to be met! When researching forex trading in Australia, spreads are something you will see a lot of.

In fact, not just in the case of currency pairs, but all tradable assets. Therefore, the spread will always feature when you are trading currencies via your ASIC broker. What exactly is spread?

Non-trading charges can be of various types and can be tricky to identify as they are not clearly mentioned. Funding Methods. Additional Considerations As well as everything we have detailed throughout this guide, there are a few other things to ask yourself when electing to find a suitable broker. Your broker will provide charting and trading technologies at no cost once you subscribe. You also need to know what to do and when trading forex. Applies to forex, stocks, commodities, and indices. Based on Australian Eastern Standard Time AEST , the trading markets open at 7 am, merging with multiple global forex markets until Friday afternoon in the USA.

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