The Best Forex Brokers in Australia
What is Forex? Suppose you are planning a vacation in the US or Europe. In that case, you will need to buy Euros or US dollars using your Australian dollars, and global currencies have different values based on the currency of exchange. Therefore, it might cost you AUD$ 1.20 to buy one US dollar.
In a world constantly looking for new ways to turn a profit, Forex trading, formerly the province of banks, other financial institutions, and high-net-worth individuals, has been unavailable to retail investors in most of the world until the advent of online trading platforms in the late 1990s.
Forex trading is essentially a bet on which of two currencies in relation to each other will go up or down in value. If the investor gets the bet right, he or she pockets the difference between the original price and the new price at the close of the trade.
Is it Legal to Trade Forex in Australia?
Forex trading is legal in Australia and most of the world, with a few exceptions. Investors in India, Pakistan, and China are subject to more stringent regulations.
Forex Regulation in Australia
The ASIC (Australia’s Security and Investment Commission) regulates Forex trading here in Australia, following rules established in the Corporations Act of 2001.
The ASIC licenses brokerage houses for Forex trading and ensures regulatory compliance. As opposed to some heavy-handed rules in the US, the regulatory environment in Australia is seen as making the country one of the best places in the world to trade Forex and one of the safest.
A Forex broker must have authorisation from the ASIC with a minimum of one million dollars in working capital and a physical office to operate and must agree to be audited at any time.
Leverage is a must for retail forex traders. There is a “Catch 22” here, as leverage – which is, in effect borrowing money from the brokerage house — both allows investors to make higher profits and steeper losses. The ASIC standard leverage for forex brokers in Australia is 1:30 for major pairs. For every dollar in a trading account, the investor can trade up to $30,000. Larger trades can lead to larger profits but also greater losses as the margin loan must be repaid.
How to Start Forex Trading in Australia
Some experts advise investors to avoid forex trading due to the high risk of loss, among other reasons. A basic forex trade involving a USD/AUD pair allows the investor to bet the US dollar will go up or down in value against the Australian dollar. The profit potential of trade amounts affordable to most retail investors is small, as currency fluctuations are also small. Borrowing money from the brokerage house allows large trades.
The profit potential is enough to attract millions of retail forex traders worldwide. The first step in starting forex trading in Australia is not selecting a broker. The first step is education, education, and more education.
The basics are simple, but the variations require more knowledge than is needed for stock trading. Beyond learning the language unique to forex, experts recommend learning the different trading strategies and technical analysis charts used in forex trading.
There are three ways to trade forex:
- The spot market
- The forward market
- The futures market
Most trades occur in the spot market, with supply and demand dictating prices. The forward and futures markets are similar as both involve trades at a later date. The forward market is an online “over the counter” private transaction with another retail trader, while the futures market involves contractual arrangements on an exchange.
Picking a forex broker is the final step. Most offer a demo account where retail investors can practise trading forex pairs with virtual money. Experts advise using the demo account to gain more than a basic understanding of how to trade and learn about alternative trading strategies. Do not begin demo trading without ensuring you understand the terminology you will encounter and any suggested strategy.
Once an investor begins using the demo account, the advice is to stay with the demo account for a minimum of one month. In addition, investors should wait until turning a profit on at least 50 trades.
The Best Forex Brokers in Australia
| Broker | Features | Regulator | Platforms | Next Step | |
|---|---|---|---|---|---|
 Between 74-89% of CFD traders lose
Founded: 2010Between 74-89 % of retail investor accounts lose money when trading CFDs |
|
ASIC, FCA | MetaTrader 4, MetaTrader 5, cTrader | ||
 Your capital is at risk
Founded: 2006Europe* CFDs ar... |
|
ASIC, FSA, FSB, MiFID | MetaTrader4, Sirix, AvaOptions, AvaTrader, Mirror Trader | ||
 77% of CFD traders lose
Founded: 200777 % of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. |
|
ASIC, CySEC, FCA | eToro Platform | ||
 Your capital is at risk
Founded: 2014 |
|
FSPR | MT4 | ||
 Your capital is at risk
Founded: 2009, 2015, 2017 |
|
ASIC, CySEC, IFSC | MT4 Terminal, MT4 for Mac, Web Trader, iPhone/iPad Trader, Droid Trader, Mobile Trader, MT5 | ||
There is no such thing as a single best forex broker in Australia with most offering a range of trading vehicles in addition to forex. The internet has comparison sites of Australian forex brokers. There is no standard for what services these review sites include making accurate one-to-one comparison difficult.
Another option is to visit investor websites frequented by forex traders. Traders love to talk, and newcomers can learn much, if not everything, they need to know to guide them to a brokerage house that best fits their needs.
Forex trading has turned the difference in value between two global currencies compared with each other into a potential means of turning an investing profit. It is a relatively high-risk proposition, with some experts advising retail investors to stay away.
The basic idea is simple. If you pick the currency pair USD/AUD, you can bet that either will go up or down in value compared to the other. The difference is your profit, but currency movements are small, so maximising profit means placing a large trade. Brokerage houses allow leverage, or borrowed money, to accomplish that.
Forex trading requires a substantial time investment to learn the system and how to use it. Forex brokerage houses offer demo accounts for practice with virtual money. There are comparison review sites on the internet to help select a forex broker. An alternative is the experience and advice of seasoned forex traders on investing blogs and forums.