Forex trading is booming in Australia, largely thanks to a liberal position towards brokerages. This sector is adequately regulated by local authorities, which guarantees a high level of security and protection for customers.
The nation's liberal, yet cautions regulatory setting has turned Australia into an ideal place to invest, drawing many top-shelf brokers to the territory. Traders here enjoy a wide range of investment tools.
If you're an Aussie and want to get in on currency trading, read on... The following paragraphs detail local rules, account deposit methods and the trading platforms that are used in Australia.
Brokerage firms operating in Australia have to comply with a strict set of rules and regulations.
Each brokerage firm must have an ASIC authorisation, otherwise their website will be blocked by the local ISPs.
Also, each broker must have an actual office there and accept that they be audited on a regular basis in order to promote transparent business operations.
In the interest of clients, brokers are obliged to hold traders' funds in separate, protected accounts. The idea here is for traders' account balances to remain in place even if the broker goes bankrupt.
Brokerage firms that seek a licence to operate in Australia are required to have at least $1 million (AUD) in working capital. This is to make sure that they can withstand harsh market volatility conditions.
Currently, there are zero leverage limits that are imposed although most brokers rightfully offer no more than 500:1 leverage, in order to keep trader losses at a minimum.
Leverage can vary according to a trader's transaction record. New traders will have access to lower leverage than seasoned pros.
The types of assets you buy and sell also determine your leverage limit. If you're trading Bitcoins and other cryptos, your leverage will likely be far lower than if you're trading crude oil or currency pairs.
ASIC has imposed a limit on credit card transfers to your broker: $1,000 (AUD) in the context of a new account. Also, any profits you make have to be reported and are included in your overall taxable revenue.
If you lose money, though, this can be deducted from your taxes!
Forex brokerages serving Australia's traders are closely monitored by the ASIC (Australia's Security and Investment Commission). This regulatory body has been in place for over 20 years.
If a broker wants to market to Australian traders, it must be ASIC-licenced. This ensures that traders' funds are secure and that the broker's operations are fully transparent.
The ASIC's website lists all the brokerages that are licenced and therefore safe. ASIC also handles traders' claims against their brokers. Thus, if a broker is thought to have improperly handled a situation, it can be subject to an investigation as well as sanctions.
The other main regulatory body of Australia is APRA (Australia's Prudential Regulation Authority). This agency oversees banks and insurers.
Currently, the maximum leverage allowed for Australian traders has been reduced; as of now it's 20:1 on both forex and gold/silver trading, 2:1 on cryptos (such as Bitcoin), 10:1 on crude oil and natural gas, 15:1 on indices and 5:1 on share trading. These limits are for regular individuals only, not professional or institutional traders.
Reasons for these relatively new leverage limits focus on the protection of novice traders from losing large amounts of money. ASIC has also effectively banned the trading of options by the general public, for similar reasons.
All forex brokerages let aspiring traders test their trading strategies on a free demo account using fake money.
If you're confident, though, and would like to trade using your actual capital, you need to fund a real trading account. Minimum requirements, however, vary from broker to broker, they can be as low as $50 (AUD) or as high as $2,500. A few brokers offer "mini" or "microaccounts", which allow you to get started with as little as $10!
In terms of money transfers to your broker, standard credit cards are the fastest. Union Pay is another option for Aussies.
For larger amounts, a wire transfer through your bank might be the way to go, although this might require a bit more time (1 to 3 days for locals, 2 to 4 days for international transfers). This can easily be done via the interet or at your local bank branch. Brokers don't charge any fees, but your bank might charge a small fee for the bank transfer.
If you use Neteller or Skrill (formerly known as Moneybookers), your e-wallet would of course have to be funded! This method provides greater confidentiality and is also quite secure.
Locals can also fund their trading account using BPAY.
In the event that you don't trade for an extended period of time (at least a year), you might be charged and account management fee, so make sure to close any dormant account.
Australia's brokers usually provide traders with a choice of software, but MT4 and MT5 are the most common as they're the easiest to use.
MetaTrader 4 and MetaTrader 5 feature several charting tools and also provide a plethora of technical analysis indicators which enable you to identify which way prices are going.
One of the key features is the ability to display prices as Japanese candlesticks, which displays the full price range of a given time unit. MetaTrader allows you to view prices in 8 different timespans, from 1-minute charts to 1-month charts and Fibonacci tracements can also easily be drawn onto a chart.
The advantage of MT5, though, is that Australian traders can also trade futures, indices, commodities, shares and other assets on them whereas MT4 is strictly for currency trading.
Both MT4 and MT5 allow you to use EAs (Expert Advisor), which automate the trading process via the use of trading robots. They are programmed with a specific strategy and can be found for free or purchased. A selection of some of the more profitable expert advisors can be found here.
Another trading platform that you might encounter is cTrader. Trades are lightning-fast and you can also open positions with a single click.
A few brokers offer an in-house trading platform, in which case it's usually a good idea to practice trading on a free demo version to get the hang of things.
Apparently, Australia is in the lead in terms of smartphone use. Only 12% of adults don't own one! Naturally, brokers know this and they have made it easy to trade using them.
In addition to trading via a regular browser (Firefox, Chrome, etc.), you can also typically download software for your tablets and smartphones (both Android and Mac). These software applications are always free, no hidden charges are involved.
Of course, the main advantage of mobile trading is that you can open or close an order at any time. Some brokers also offer alert systems (example, you can have an alert sent to you when the EUR/USD falls to a certain price). And like their desktop counterpart, you also can use technical indicators and other chart-based tools to help with the decision-making process.
Thanks to leverage, you don't need to start out with a fortune. If you have 20:1 leverage, and have $1,000 (AUD) in your brokerage account, this means you can trade $20,000 worth of EUR/USD. Of course, you should start out with small lot sizes (0.1 lots for example) until you get used to price action and the market's volatility.
Of course, your national currency remains your account currency. Brokers in Australia let you choose from various currency accounts: AUD, U.S. dollar, euros (€) and pounds (£). The best is to use AUD in order to avoid any unnecessary exchange fees.
These used to be extremely common, however bonuses are increasingly forbidden around the world and are often a sign that the broker needs to rely on gimmicks to attract traders, rather than low spread and fast trade execution. Also, these bonus often require huge trading volumes with your account before they can be fully obtained, so read the fine print!
Brokers in Australia allow you to trade the more common pairs (AUDJPY and AUDUSD), as well as more exotic pairs such as the AUDHKD, AUDCAD, AUDMXN and the AUDHUF.
In order for you to use leverage (which enables you to trade with more money than you actually have in your trading account), you will need to meet your broker's margin requirements. Basically, margin is how much money you must have in order to maintain a trading position. When your margin isn't enough, your broker will issue a margin call (asking for more money to keep the trade open), otherwise your trade will be closed.