Learning

How To Trade Forex in Australia

how to trade forex in australia

ADVERTISEMENTS
how to trade forex in australia 5 Trillion Dollars. That is the amount of daily transactions on the Forex Market. This makes it one of the largest Markets in the World.
It’s favoured and traded by both institutional, professional and amateur traders. In very basic terms; Forex is an abbreviation for Foreign Exchange, and you trade (i.e. exchange) one currency pair for another.

What is Forex?

Forex, or Foreign Exchange is a market on which a person trades currency pairs.
These are usually displayed as EUR/USD and you have two choices – buy and sell.
Based on our example of Euro and U.S. Dollar:
What happens when you buy a Forex Pair
You are buying EUR and Selling USD
What happens when you sell a Forex Pair
You sell EUR while buying USD
You will also usually see a whole number and a decimal close to the currency pair; this is known as the rate. In our example this number expresses how much USD a single EUR is worth.
That’s the simple part. With an intuitive platform, you could trade single currencies all day without breaking a sweat, but there’s more to Forex than trading single currency pairs.

Why Trade Forex?

Forex is favored by multiple types of traders from professional to complete beginners. It is a diverse market; most brokers offer an extensive list of currencies and each currency is affected differently, allowing you to skirt risk when things get volatile or seize opportunity from multiple instruments. One currency might be jumping around, and another might not even move from its previous day’s price (or rate).

Another reason people favor the Forex markets is because of its volatility; although this increases risk, it also increases opportunity. This is especially true if the strategy you are using depends on making trades throughout the trading day.

The high volume of transactions in the forex market allows traders to buy and sell without any delays caused by a lack of buyers or sellers. Forex is also a purely global market. It is wide reaching and diverse, meaning when certain currencies are volatile, others are not. Time is also a benefit; the forex market is open 24 hours a day, 5 days a week. The forex market opens in sessions:

ADVERTISEMENTS
Market/Session GMT
Sydney (Australia) Open 9.00 PM
Sydney (Australia) Close 6.00 AM
Tokyo (Japan also known as the Asian Session) Open 12.00 AM
Tokyo (Japan also known as the Asian Session) Close 9.00 AM
London (UK also known as the European Session) Open 7.00 AM
London (UK also known as the European Session) Close 3.00 PM
New York Open 12.00 PM
New York Close 9.00 PM

To see specific instrument trading hours please refer to:  trading hours.

Volatility increases during session overlap and during the first hour of sessions opening. You can usually expect high volatility during the London/New York session overlap as they account for the largest volume of transactions on the Forex market.

Of course, volatility is also affected by political and policy changes which can either exaggerate or mitigate opening and overlap times. In certain cases opening and closing of markets can be marked by significant price movements, running on the momentum created by the announcement, event or report.

For example, if the market is generally cautious due to certain geopolitical changes or threats like in the case of the China-U.S. trade war, currencies might not be as mobile. Another factor that may boost volatility is market-affecting news released on the weekend, causing a currency to jump upwards or substantially drop. This is effect is also called “the weekend gap”.

ADVERTISEMENTS
Volatility: Opportunity & Risk

There are numerous ways to trade Forex CFDs but most traders prefer day trading for a few reasons: as mentioned previously current events and news can significantly move markets. This increases volatility, and because CFDs give you the ability to trade both upwards and downwards movements, some traders actually use this as opportunity. Of course, volatility causes prices to move rapidly and in some cases unpredictably, increasing risk.

How Much Do I Need to Trade Forex?

Another reason FX trading is so popular is its low barrier of entry. You can open an account and trade for just $25 with easyMarkets. easyTrade – exclusive to easyMarkets – is also a good way to control your initial cost, as it allows you to set and lock your maximum risk (which is the amount you could potentially lose if your trade goes against you). Want to give it a try? Click on the button below.

CFD Trading: Unlock Market Potential

CFDs are unique financial instruments favored by investment professionals and institutions, due to their flexibility. CFD Shares, Forex, Commodities and Cryptocurrency allow you to trade both upwards and downwards trends.

ADVERTISEMENTS

Another benefit of CFD trading compared to other types of trading is the availability of trading tools and conditions such as negative balance protection, guaranteed free stop loss, take profit and leverage (which increases the size of your trade but can also increase your risk). These tools and conditions are available at no additional cost to the client on easyMarkets proprietary platform and app.

Many institutional and professional level traders use leverage because it allows for fewer funds to be used to open a bigger trade. This means that they can open multiple positions with the same amount that would potentially be needed for an unleveraged position.

What is a Stop Loss?

Stop loss is another reason Forex CFDs are popular amongst serious traders. If you aren’t familiar with this term, stop loss is a tool that protects you against runaway losses that can impact your other trades.

When the market moves against a trade and margin limit is reached, open trades start closing until the margin necessary is covered. With stop loss you set a price level that you choose, and your trade will close at that point if you have adequate margin, but only when trading on easyMarkets platform and app is this guaranteed because of no slippage.

CFDs are unique financial instruments favored by investment professionals and institutions, due to their flexibility. CFD Shares, Forex, Commodities and Cryptocurrency allow you to trade both upwards and downwards trends.

No Slippage: Trade Without Delays

easyMarkets offers trading without slippage on its proprietary platforms. This means that the rate you open the trade is the rate your trade is executed. This is important because in non-CFD trading, your trade may execute at a higher or lower price.

This is because when selling or buying non-CFD currencies, transactions need to be “matched”, i.e. if you are selling, a buyer or buyers need to match your trade. If someone (or a group of people) isn’t trading the opposite of your trade, you have to wait until they do.

Some CFD brokers do not offer zero slippage guarantee, so this is another distinct benefit you have access to when you trade on easyMarkets platform and app . Trading with slippage can cause unforeseen costs or smaller profits because the trade opens or closes at a different rate than you wanted it to be executed. This effect becomes especially amplified during

Leverage Trading

Another reason the forex market is popular is due to the availability of leverage. Leverage is a trading condition that allows the trader to increase the size of their trade. Of course, as the size of your trade increases so do your margin requirements and risk. Because of the increased margin requirements, a smaller negative move will cause your trade to close.

Forex Currency Pairs Explained

In forex trading currencies are usually expressed in pairs (sometimes referred to as crosses). They are usually displayed as:

EUR/USD

In the pair above EUR is called the base currency and the USD is the quote currency. The base currency is 1 and the quote currency is how much it’s worth in the base currency. For example if EUR/USD is 1.08, it means 1 Euro is worth 1.08 U.S. dollars.

Majors, Minor and Exotic Currency Pairs

Currency pairs are usually separated into major, minor and exotic currency pairs. Major currencies always involve the USD and one of the following:

Euro (EUR)
British Pound (GBP)
Swiss Franc (CHF)
Swiss Franc (CHF)
New Zealand Dollar (NZD)
Japanese Yen (JPY)
Canadian Dollar (CAD)

Major currency pairs are favored by new traders because of their high liquidity and large amount of available data. News outlets frequently cover events which affect these currencies. Also, many commodities including Oil, Corn, Cotton (to mention a few) and most commercial and precious metals are bought and sold in USD.

Minor currency pairs include the currencies in the list above, but not the USD. For example; AUD/JPY, EUR/CHF, EUR/GBP are minor pairs. Minor pairs also offer large amounts of data, since most of the currencies involved are some of the market’s most popular.

Exotic pairs involve currencies from developing countries and a major currency, such as USD/MXN. These pairs can have less liquidity, depending on which currencies are involved, and are usually considered to be significantly more volatile than major pairs or crosses. As such, exotic pairs are preferred by more experienced traders to round off their portfolio with higher risk trades.

Leave a Reply

Your email address will not be published.

Back to top button
%d bloggers like this: