The Top FX Australia Providers
An Overview of the Forex Industry in Australia
Forex describes the act of trading currencies often undertaken by speculators and investors in the foreign exchange market. For example, if the U.S dollar weakens in value relative to the Australian dollar, a trader will sell U.S dollars and buy Australian dollars. In case the AUD strengthens, the USD’s purchasing power increases. In such a case, the trader can buy more USD thus making a profit. It is almost the same as stock trading. Traders purchase stocks that they think will increase in value and sell stocks whose value is likely to depreciate in the future.
How to read a quote?
Since traders compare one currency to another, they are quoted in pairs on the forex market. Reading a quote is a straightforward method. For example, you compare the value of one Australian dollar to the U.S dollar. The first listed currency is known as the base currency and the currency is quoted in this currency.
What is a lot?
A ‘lot’ represents the number of units that are bought and sold when trading currency. FX accounts in Australia use ‘standard’ lots which means 100,000 units of currency. Other types of lots available include mini-lot which is 10,000 units and micro-lots which is 1000 units. You can trade as many lots as you wish as long as they are in increments of the chosen lot. Ie: if you trade 5 standard lots that will be 500,000 units.
One thing to look out for when trading lots is the cost charged by the broker per lot. Costs trading with smaller lots may be more expensive, especially if since will need to buy or sell more lots to achieve the same volume as a single standard lot.
What is a margin/leverage?
Forex brokers and CFD brokers allow you to execute trades using borrowed money. It allows traders to take advantage of a margin. A leverage of 100 to 1 enables you to trade with $10,000 in the market by using 1,000 dollars as a security deposit. This $1000 is known as the margin. You can take advantage of margins to control more money in the market than you have in your account. However, this leverage can also substantially increase your losses. FX trading is not a suitable venture for all investors who are not willing to take risks. A margin requirement is a specific amount a trader is required to keep aside to hold a position. It can be a good faith deposit expected to keep open positions. It is a part of your account equity allocated as a deposit and not a transaction fee.
Leverage or Margin are fundamentally the same except they are expressed differently. Leveraged products will usually be expressed as a ratio. Thus, leverage of 100:1 as mentioned meant you can trade $10,000 using $1,000 as security. Margin or margin rate on the other hand is expressed as a percentage. Thus 1% Margin rate of $10,000 equates to $1,000 needed margin.
What is a pip?
It is the unit used to count losses or profits. Most currency pairs are quoted to four decimal places. The fourth value after the decimal point is what you use to count a pip. Anytime a point in the quote moves, it is counted as a pip of movement. For example, if the AUD/USD increases from 1.4011 to 1.4018, the AUD/USD currency pair has grown by seven pips.
What is Spread?
Spread is similar to pip. The spread is the difference between the sell or bid price and the buy or ask price. For example if the buy price is 0.83860 and the sell price is 0.83855 then 0.83860 – 0.83855 = 0.00005 is the spread and this can be expressed as 0.05 pips when rounded.
Licensed and Regulated Australian Forex Brokers
It is important to consider signing up with a good broker when joining the FX Australia market. The Australian government rigorously regulates and licenses Forex Australia brokers. This means the broker must be granted an adequate Australian Financial Services License by the Australian Security and Investment Commission to legally trade in Australia. They also monitor all Foreign Exchange Contracts and Derivatives to make sure they are legal. To see if a broker is ASIC regulated you will find the brokers ASFL licence number published on their website.
Top FX Traders in Australia
IC Markets is probably one of the best FX Australia brokers if you are looking for high leverage trading. They offer quick execution speeds using international servers. In addition, they record a mainstream leverage of 500 to 1 and have the low fees compared to other FX Australia brokers. What a 500:1 margin means is that for every dollar used in trading you can trade an equivalent of 500 dollars. So if you have 100 dollars you can trade 50,000 dollars and create a 50 percent profit. However, always request a level that suits you since high leverage may come with significant losses. IC Markets offer trading is done via electronic data communication (ECN) therefore have no dealing desk.
Forex Australia traders receive the most from this platform because it provides quality infrastructure and hardware set up. They have servers set up in Wall Street for users of Meta Traders and in London for cTrader users. Setting up infrastructure near the main trading hubs and having financial institution partnerships guarantees fast trading. IC markets offer FX Australia traders excellent customer care. The customer care team is proficient in currency trading and has years of experience in the field. Customer service support is available 24 hours on weekdays. IC markets is an ECN trader that has no trading desk. It means that Forex Australia traders deal directly with the markets that offer lower spreads and quick execution speeds.
Forex.com is a Forex Australia broker that trades in 50 pairs of currencies. The agents operate through Gain Capital a financial institution that has been in the industry since 1999. With this platform, traders get access to the research information, headlines, and news. The broker also offers online tutorials that equip operators with the necessary information required to make the best investment decisions.
It started its operations in 2010 and is rapidly growing as one of the best Forex Australia brokers. They do direct trading with liquidity markets offering reduced slippage, lower spreads, and rapid execution speeds. They are available 24 hours on weekdays and have a negative balance protection policy. They have the fast trade executions because they allow FX Australia traders to make direct trades with currency pools.
Why you should trade Forex?
FX trading occurs throughout the day on weekdays. In addition, Forex trading does not have limitations on short currencies. If you believe a currency will fall, sell it and if you feel it will increase in value, purchase it. In Forex, money can be gained or lost any time. The fact that most traders concentrate in a few currencies means there are plenty of people trading. This makes it easy for you to get in and out of trades any time you prefer. The liquidity available is deep and allows you to trade at high leverage to take advantage of market movements. However; you need to remember that it might increase your profits as well as your losses.
The low trading costs is another reason why there are plenty of Forex Australia traders and brokers. Usually there are no hidden mark-ups or charges associated with liquidity providers with most trading accounts having tight spreads with competitive commissions. Forex trading creates international exposure. Investors are always looking for opportunities where they can make money. Forex is the easiest way to invest in other markets without the need for financial statements and securities laws.